In a strongly worded letter, U.S. Health and Human Services Secretary Kathleen Sebelius warned insurers across the country the current administration will not tolerate any claims rate increases are due to President Obama’s health care law.
“There will be zero tolerance for this type of misinformation and unjustified rate increases,” Sebelius wrote. “Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.”
Shot Across Insurers’ Bow
The letter, dated September 9, was sent to Karen Ignagni, president of America’s Health Insurance Plans, which represents America’s private health insurance companies.
“Health insurance premiums are increasing because of soaring prices for medical services, the impact of younger and healthier people dropping their insurance during the weak economy, and additional benefits required under the new law,” Ignagni said in a statement released to the media. “It’s a basic law of economics that additional benefits incur additional costs.”
Sebelius’s letter came in advance of several new requirements in Obama’s law which took effect on all plans beginning September 23. While the Democratic leadership has singled out several aspects of these requirements as positives for consumers, insurance companies note these provisions are costly, forcing them to increase premium rates.
According to Nebraska Senator Mike Johanns (R), Secretary Sebelius is sending a clear “threat” to private insurers.
“This sends a message, a threat if you will,” Johanns said. “The health care bill has all of these new mandates and new requirements—for coverage and preexisting conditions and levels, and I could go on and on. Then when rates go up, it’s because insurance companies say that they are going to comply—and in some cases have already complied early.”
Obama Admits Insurers’ Point
Private insurers in several states—including Colorado, Oregon, Wisconsin, North Carolina, and elsewhere—have sought rate increases in the six months since the new health care regime became law, all citing the new requirements as a significant reason for the hikes. Celtic Insurance Co. announced in August that half of its requested 18 percent increase is due to the new mandates, while large insurer Aetna has also credited much of the increases it is currently seeking in California and Nevada to the mandates’ costs.
“There is nobody in America who doesn’t believe that these new requirements will raise costs,” Johanns said. “Of course it will raise costs. We all understand that, and even the president has conceded that point.”
Johanns was referring to a White House press conference held the day after Sebelius’s letter was released, in which President Obama claimed the administration had always anticipated higher costs because of the expansion of coverage.
“As a consequence of us getting 30 million additional people healthcare, at the margins that’s going to increase our costs. We knew that,” Obama said. “We didn’t think that we were going to cover 30 million people for free.”
‘These Burdens Are Huge’
The White House had previously claimed insurers would need to raise premiums by only 1-2 percent, but a recent study from the Kaiser Family Foundation concerning current employee health benefits offered in 2010 indicates a wide gap between current coverage offerings and the requirements of Obama’s law.
In 2008 Obama promised his policies would reduce family premiums by up to $2,500 “by the end of my first term as President.” But meeting the requirements of his law, Johanns notes, will likely translate to higher costs, passed on to employers and taxpayers.
“We’re not fools, and we know you don’t get something for nothing,” Johanns said. “These burdens are huge, and these costs will ultimately be borne by those who work and drive our economy, by businesses and employers, and then consumers and taxpayers.”
‘Regulatory Scare Tactics’
Johanns says a nationwide crackdown on insurers could go beyond Sebelius’ rhetoric and instead resemble stepped-up enforcement of technical bureaucratic requirements. He notes California’s insurance regulators are currently seeking $9.9 billion in penalties from insurer PacifiCare.
According to legal expert Maureen Martin of The Heartland Institute, the alleged violations in the California case are minor and the lawsuit is an example of “regulatory scare tactics.”
“California insurance regulators couldn’t be more abusive in seeking these penalties,” Martin said. “The company has not had its opportunity to present its side of the case yet, which the company says will show the vast majority of the alleged violations are technical in nature. The $9.9 billion number represents the maximum possible penalty. Previous high penalties were in the $8-$10 million range.”
This year the California Office of the Patient Advocate published a survey of PacifiCare members in which the company and two others received five stars, the highest possible rating.
Threatens to Ban Insurers
Johanns also claims Sebelius’ letter contains an additional threat—that insurers deemed to have broken this requirement could be barred from the new health insurance exchanges, preventing them from accessing what is expected to be a significant new marketplace.
“We will also keep track of insurers with a record of unjustified rate increases,” Sebelius wrote. “Those plans may be excluded from health insurance Exchanges in 2014.”
Johanns remains committed to battling the law next year in a new Senate.
“What we’ve got to do is to make the case against these wrongheaded policies, make the case about how awful this is, and make it in Florida, California, Nebraska, Colorado—everywhere we see these rates going up,” Johanns said. “Hopefully, once the American people have their say in November, we’ll have the votes to get this repealed.”
Ben Domenech ([email protected]) is managing editor of Health Care News.