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Sebelius Puts AHIP 'On Notice' Sebelius Puts AHIP 'On Notice'

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Sebelius Puts AHIP 'On Notice'

September 10, 2010

The nation's top healthcare official has lashed out at the private insurance sector, saying there would be "zero tolerance" for instances where premium hikes are pinned on the still-new reform law.

In a letter sent Thursday to America's Health Insurance Plans, the industry's largest lobbying group, HHS Secretary Sebelius knocked what she called a campaign of misinformation from some companies who are "falsely blaming premium increases" on the six-month-old law.

"Given the importance of the new protections and the facts about their impact on costs, I ask for your help in stopping misinformation and scare tactics" about the overhaul, she stated. "Moreover, I want AHIP's members to be put on notice: the administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections."


The sharply worded letter revisits a harsh debate from earlier this year between the federal government and insurance executives, some of whom pushed double-digit rate increases onto their policyholders. Anthem Blue Cross of California, for instance, originally said it would raise costs for some of its members up to 39 percent, but it later pulled back after an analysis revealed errors in the way it calculated its rates. Last month, the company, a subsidiary of WellPoint, settled on a 13.5 percent increase.

But by then the damage had already been done. Sebelius, a former state insurance executive, joined with a host of Democrats to parlay anger over the rate increases into a means to help bolster support for the reform package.

"According to our analysis and those of some industry and academic experts, any potential premium impact from the new consumer protections and increased quality provisions under the [law] will be minimal," Sebelius stated in the letter addressed to AHIP President Karen Ignagni. "We estimate that that effect will be no more than one to two percent."

Even so, federal actuaries project private health insurance spending to fluctuate wildly over the law's prime implementation years. In the near term, the data suggests the industry can expect spending growth of around 4.3 percent, largely due to an extension of more generous COBRA premium subsidies. Those subsidies, however, expire in 2011, slowing the rate of spending.

Still, companies can expect a double-digit increase, up to 12.8 percent, in 2014 -- the year that a new health insurance marketplace debuts.

In an email sent to AHIP's member organizations, Ignagni said that higher premium costs are the result of "soaring" prices for medical services; younger and healthier individuals who dropped coverage during the weak economy; and a raft of new benefits that carriers are required to offer under the reform package.

"It's a basic law of economics that additional benefits incur additional costs, and the impact on premiums depends on the type and amount of coverage policyholders had before," she wrote. "Health plans will continue to do everything they can to incorporate all of these new benefits while keeping health care coverage as affordable as possible for families and employers."

The HHS letter comes at the same time that GAO ruled that a government-funded brochure, sent to Medicare beneficiaries in May, did not violate a law that prohibits federal spending for "publicity or propaganda" purposes.

Republicans charged that the four-page mailer, called "Medicare and the New Health Care Law -- What it Means for You," heavily slanted the effects of health reform in the government's favor.

In its report, the GAO said that while HHS did not violate the law, it nevertheless "presented abbreviated information and a positive view of [the bill] that is not universally shared."

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