Tuesday, February 23, 2010

HHS Insurance Costs Report

The Department of Health and Human Services (HHS) has released a new report following Secretary Kathleen Sebelius' strong criticism of WellPoint, Inc.'s California affiliate Anthem Blue Cross' plan to raise premiums for its California customers by as much as 39 percent.

Anthem had subsequently announced it would delay raising the rates for two months. Sebelius responded to that news by saying, "While a two-month delay offers some temporary relief, what California families need is long-term health insurance security, so that they don't face sharply higher prices or fewer benefits. This rate increase underscores the urgency of passing real health insurance reform."

In the report, "Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System," the Anthem case is specifically pointed out as an example of "shocking increases" in the market, and insurance experts are quoted as saying rates will continue to rise in 20, 25, or even 30 percent.

The report also notes that other rate increases have been requested, including from Anthem of Connecticut (24 percent rate increase request last year, rejected by the state); and Anthem in Maine (18.5 percent last year, rejected by the state, currently requesting a 23 percent increase); Blue Cross/Blue Shield of Michigan (56 percent); Regency Blue Cross Blue Shield of Oregon (20 percent); UnitedHealth, Tufts, and Blue Cross (13-16 percent in Rhode Island).

The report says that the rate of some premium increases far exceeds the growth rate in national health expenditures, refuting the claims of insurance companies that premium rises are justified by health care costs.

The report says the main problem in the insurance system is the high concentration of markets, which significantly hampers competition. In addition, the amount spent by insurance companies on administrative costs has grown faster than that spent on prescription drugs. The report says three of the top five insurers reduced the percentage of premium dollars spent on medical care in proportion to administrative expenses and profits. The six largest publicly held insurers are also insuring fewer people. The report criticizes the compensation of the five largest insurers' CEOs (up to $24 million in 2008) and the 250 percent increase in profits for the ten largest insurance companies between 2000 and 2009, while individuals and families face mounting difficulties in finding affordable insurance, and often are not able to buy insurance due to the premium costs.

The report places health insurance reform on the top of measures to address the rising cost of insurance, including measures on oversight so that insurance companies will have to report how they spend the premium dollars, and provide public justification for premium increases; eliminating lifetime limits to benefits; eliminating preexisting conditions provisions; ending rate changes for those who have had illness or for age; and establishing a health insurance exchange.

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