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HEALTH LEADERS CRITICIZE OBAMA PLAN TO CREATE FEDERAL AUTHORITY OVER HEALTH INSURANCE RATES

Kaiser Health News –

Feb. 23: State insurance regulators said President Barack Obama goes too far with his proposal Monday to give the federal government new power to reject health insurance rate increases.

Three veteran state insurance commissioners said in interviews that states are in a better position to judge insurers’ premium proposals. But two of the commissioners, Sandy Praeger of Kansas and Kim Holland of Oklahoma, said they’d welcome federal advisory help. Pennsylvania’s commissioner, Joel Ario, said the federal government could also help set standards for states to use in reviewing insurance rates.

States regulate health insurance, although they vary widely on the minimum level of coverage they require of insurers and financial solvency requirements. More than half the states allow insurers to implement rate increases without first obtaining state approval.

Ario said if states and the federal government try to share the responsibility it could pose a problem because it would be unclear who has the ultimate authority. “It could end up as a ‘who’s on first and what’s on second’ problem,” he said.

He was appointed by Democratic Gov. Edward Rendell. Holland, a Democrat, and Praeger, a Republican and former president of the National Association of Insurance Commissioners, were both elected.

Obama’s proposal to create a Health Insurance Rate Authority was included in his 11-page health plan that attempts to merge the health bills passed by the House and Senate last year and restart legislative efforts to pass overhaul legislation. His proposal said the authority would “provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior.”

Under the plan, “if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable,” the proposal said.

Obama’s plan lacked details about how the federal rate authority would work, or for how long. Under the House and Senate health bills, individual health insurance would be sold through exchanges, marketplaces that would set standards for plans and oversee rates. The president’s plan sided with the Senate version that calls for state-based exchanges instead of one large national exchange as in the House bill. The exchanges would not start until 2013.

The new federal authority goes beyond what’s contained in either the Senate or House bills. In the past two weeks, Obama administration officials have tried to build public outrage over recent insurance rate hikes in the individual health insurance market, especially a 39 percent increase sought by Anthem Blue Cross of California, the largest for-profit health insurer in that state. Last week, the insurer agreed to postpone the increases until May 1.

Efforts to pass legislation stalled a month ago after the Democrats lost their filibuster-proof majority in the Senate with the election of Massachusetts Sen. Scott Brown, a Republican.

America’s Health Insurance Plans, the health insurers’ major lobbying group, said Monday the White House is spending too much time focusing on premium increases in the individual insurance market, which affects seven percent of those with private coverage. The group said blocking rate increases doesn’t do anything to resolve their underlying cause: rising medical costs and increased use of medical services.

The Blue Cross and Blue Shield Association said, “This new agency, which creates a highly politicized federal review process, would divorce premium review from the state regulators’ responsibility of assuring that health plans have enough funds to pay future policyholder claims, potentially leading to multi-plan insolvencies across the country.”

Praeger and Holland said creating a federal rate authority would not deal with the problems driving higher premiums. “If you want to keep costs under control, it’s not about managing health care premiums,” Praeger said, “it’s about managing the underlying health care costs.”

Holland defended state regulation of insurance. “Health insurance is very localized and states already have a number of tools to monitor rates,” she said. “Overall, I think state regulators do a good job.”

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Sebelius, WellPoint Continue Battle Over California Rates

Published 2/12/2010

WellPoint Inc. (NYSE:WLP) says the cost of providing individual health insurance in California is soaring, but a federal regulator says the company should be using its national profits to hold down premium increases.

Anthem Blue Cross of California, a unit of WellPoint, Indianapolis, recently announced that it would be increasing premiums for some California individual health insurance customers by as much as 39%. The increases are set to take effect March 1.

California Insurance Commissioner Steve Poizner asked Anthem to postpone the increase, to give an independent actuary time to verify whether the increase is justified.

Kathleen Sebelius, the U.S. secretary of Health and Human Services and former Kansas insurance commissioner, wrote to ask Anthem Blue Cross executives for an explanation of the increase, and she suggested that the proposed increase shows why the United States health reform.

Now WellPoint and Sebelius have fired off new letters.

Brian Sassi, president of the consumer business unit at WellPoint, writes to Sebelius that WellPoint’s profit margins in California are a little lower the profit margins of competitors in the state.

Anthem earned $12.62 per member per month in 2008, compared with an average of $1.845 per member per month at one nonprofit competitor and $13.22 per member per month at another.

Only about 10% of Anthem’s health insurance customers in California are individual health insurance policyholders, and the proposed 39% increase that is getting most of the media attention affects a relatively small percentage of individual policyholders who insist on sticking with their current policies and will be changing age categories, Sassi writes.

“The rate changes excluding the impact of age-category changes range from a 20.4% decrease to a 34.9% increase,” Sassi writes.

Many individual insurance policyholders can reduce the effects of the proposed premiums increases by changing products, Sassi adds.

WellPoint welcomes the California Department of Insurance review of the rate increases and believes it can show why the increases are actuarially sound and necessary, Sassi writes.

“Rate increases reflect the increasing underlying medical costs in the delivery system, which are unsustainable,” Sassi writes.

Overall health insurance rates are increasing because of factors such as increases in provider prices and the aging of the population, but other factors are accounting for the rapid increases in the California individual health insurance market, Sassi writes.

When the economy is bad, only the sickest individuals choose to keep paying for individual health coverage, and that means the insureds remaining in the pool use more services, Sassi writes.

Meanwhile, Sassi writes, the healthier insureds who are keeping their coverage are migrating toward the cheaper, higher deductible policies, and that makes the risk profile of the insureds who are sticking with the lower-deductible policies look even worse.

“Other individual market health insurers are facing the same dynamics and are being forced to take similar actions,” Sassi warns.

To prevent antiselection in the individual health insurance market, WellPoint believes that Congress must require all Americans to have some kind of health coverage, provide subsidies for people who have serious trouble paying for coverage, and impose significant penalties on individuals who go without coverage, Sassi writes.

Sebelius does not discuss the state of the California insurance health insurance market in her reply, but she notes that WellPoint as a whole reported $2.7 billion in net income for the fourth quarter of 2009.

“It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options: pay more for coverage, cut back on benefits or join the ranks of the uninsured,” Sebelius writes. “High health care costs alone cannot account for a premium increase that is 10 times higher than national health spending growth.”

The Anthem decision to raise rates demonstrates the need for reforming the health insurance system, Sebelius writes.

“Reform will end the worst insurance company practices and put doctors and patients — not insurance companies — in charge of medical decisions,” Sebelius writes. “If we fail to implement reform, insurance companies will continue to prosper while families will continue to struggle

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