Kathleen Sebelius Tells Insurers Not to Raise Premiums Unjustifiably
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Health insurers have started sending letters to their policy holders to notify them that the premiums for 2011 will be increased and the increase is due to the consumer protections provided by the healthcare reform law, which extends health insurance coverage to more Americans.
In response, United States Department of Health and Human Services Secretary Kathleen Sebelius sent an open letter Sept 9 to Ms. Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP) saying that the Obama Administration has zero tolerance for health insurance providers to falsely blame premium hikes for 2011 on the patient protections provided by the Affordable Care Act.
Kathleen Sebelius details reasons in her letter to explain why the consumer protections and out of pocket savings provided in the Affordable Care Act should result in at most a minimum increase in health insurance premiums for most Americans.
Citing analyses conducted by her department and some experts from the industry and the academia, Sebelius says the provisions in the healthcare reform law will increase the premiums by no more than one to two percent. She says that the Urban Institute estimated the increase will be 1 to 2 percent whereas Mercer consultants estimated the increase at 2.3 percent.
Kathleen Sebelius explains why the impact will be minimal:
Any premium increases will be moderated by out-of-pocket savings resulting from the law. These savings include a reduction in the “hidden tax” on insured Americans that subsidizes care for the uninsured. By making sure insurance covers people who are most at risk, there will be less uncompensated care, and, as a result, the amount of cost shifting to those who have coverage today will be reduced by up to $1 billion in 2013. By making sure that high-risk individuals have insurance and emphasizing health care that prevents illnesses from becoming serious, long-term health problems, the law will also reduce the cost of avoidable hospitalizations. Prioritizing prevention without cost sharing could also result in significant savings: from lowering people’s out-of-pocket spending to lowering costs due to conditions like obesity, and to increasing worker productivity – today, increased sickness and lack of coverage security reduce economic output by $260 billion per year.
Bloomberg reported early that insurers will be increasing health insurance premiums for their policy holders beginning in 2011 and blame the premium hike on the Affordable Care Act signed by President Barack Obama.
Not all insurers plan to increase premiums, but an estimated 63 percent of businesses will be affected. Accordingly, many employers will require their employees to pay a higher premium to keep their health insurance plans. The National Business Group on Health found in a survey that 46 percent of employers plan to raise out-of-pocket costs for their employees.
The Kaiser Family Foundation found that total premiums for family policies including both workers and employer contributions will increase 3 percent to $13,770 this year. The letter from the Secretary Sebelius indicates that she is aware of the increase and the secretary says the increase is minimal compared to previous years.
However, the survey also found that in 2010 American workers will have to pay about $4,000, $482 or 14 percent more than what they paid for last year. This increase almost covers all of the 3 percent increase in the total premiums. In other words, what employers pay for its premium for employees' family plans actually remains the same as what they paid last year.
Kathleen Sebelius reminds the AHIP that the law gives states the authority to review any increase in insurance premiums and "the (Obama) administration in partnership with states will not tolerate unjustified rate hikes in the name of consumer protections." She says those insurers who dare to raise the premiums unjustifiably will be excluded from health insurance exchanged in 2014. But it remains unknown if those insurers will receive other penalties.
Jimmy Downs
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