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Insurers’ Naked Greed Triggers White House Response

I can’t remember seeing any kind of federal response to health premium increases, so a letter Thursday from Health and Human Services chief Kathleen Sebelius (thanks to Igor Volsky at Wonkroom for the tip) is unusual not just for its tough language, but because it exists at all. In a letter to Karen Ignani, president of the insurance industry lobbying and trade association, Sebelius warns insurers to cut it out with blaming their double-digit price hikes on federal health reform:

It has come to my attention that several health insurer carriers are sending letters to their enrolees falsely blaming premium increases for 2011 on the patient protections in the Affordable Care Act. I urge you to inform your members that there will be zero tolerance for this type of misinformation and unjustified rate increases.

Of course, it appears to be no accident that insurance companies are shoving out these increase notices just before the November elections, or that Ignagni herself, the industry’s top lobbyist, is writing the script for her members

Even as the health insurance industry is proving the need for regulation of rates, the industry is mounting a full-court press against any regulation. 

Unfortunately, Sebelius and the White House don’t have much beyond tough talk in their arsenal. The letter uses the one credible threat at the administration’s disposal: exclusion of insurers that gouge their customers from the new state insurance exchanges in 2014:

We will … keep track of insurers with a record of unjustified rate increases; those plans may be excluded from health insurance Exchanges in 2014. 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 [required by the ACA].

But 2014 is a long way away, and insurance companies are not even commited to the Exchanges, where it will be all too easy to see who provides the best value for the money. 

All the more reason for states to get with it in regulating health insurance directly. Insurers aren’t the only cost problem, but it’s outrageous that they are blaming a new round of 18% or 20% premium hikes on the 1% to 2% cost of new patient protections. Of course, it was insurer greed that triggered the new protections from, for instance, arbitrary policy cancellations and exclusion of sick children from coverage.

At least we know the industry is taking Sebelius’ letter seriously because of the speed of its response. Ignagni snapped back with lots of fire and few facts that the insurance industry can’t be blamed for anything. No wonder insurance companies are as popular as used car salesmen. At least the car dealers don’t hold life and death power like the health care dealers and their chief salesperson, Ignagni.

One point in the insurers’ letter deserves a closer look: 

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.

Yes, lots of people are dropping their insurance because they can no longer afford it. Yet insurers are actually seeing the lowest level of medical inflation in years, and holding  tens of billions of dollars of surplus in corporate reserves that could temporarily quell premium increases. But no, they’d rather throw hundreds of thousands of patients to the wolves so they can enter the new era of health reform with the highest possible rates.

That’s greed at it most naked.


Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

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Consumer Watchdog

Consumer Watchdog

Consumer Watchdog is a nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. We deploy an in-house team of public interest lawyers, policy experts, strategists, and grassroots activists to expose, confront, and change injustice every day, saving Americans billions of dollars and improving countless lives.