Health insurance companies have figured out a manipulative strategy for protecting their profit margins in the face of the new health insurance law. They are already planning big hikes before the law takes effect. Then, conveniently, they’ll blame the rate hates on health care reform. Pretty sweet, huh?
President Obama has already called them on it, according to The WaPo:
President Obama met with the chief executives of more than a dozen major insurance companies at the White House on Tuesday to caution them against using new requirements in the recently enacted health-care reform legislation as a pretext to substantially raise premiums. “There are genuine cost drivers that are not caused by insurance companies. But what is also true is that we’ve got to make sure this new law is not being used as an excuse to simply drive up costs,” the president said in a brief speech afterward. “The CEOs here today need to know that they’re going to be required to justify unreasonable premium increases.”
Karen Ignagni, president of the trade association America’s Health Insurance Plans, said she and other industry representatives found the meeting to be a “very constructive” opportunity to make the case that the main cause of rising premiums is not industry greed but recessionary pressures and increasing medical and drug costs.
“For instance, in the small employer and individual market, the economy is causing younger, healthier people to drop coverage, which means that the costs of the [remaining] risk pool is higher because it’s older and sicker,” she said.
Insurers have already been busy raising their rates, according to The NYT:
The White House meeting coincides with Monday’s release of a survey by the Kaiser Family Foundation, a nonprofit health policy research group, that found that premiums for the policies most recently bought by individuals had increased by an average of 20 percent.
“The survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” said Drew Altman, the foundation’s president.
Mr. Obama’s message to insurers will serve to put the industry on notice and position the White House politically should voters start to link premium increases to the new law. With the law expected to play a significant role in the midterm elections, the president has been using his platform to sell the bill’s most immediate benefits and, by extension, to defend Democrats in Congress who risked their careers to vote for it.
And, Ignagni’s excuse notwithstanding, a new report, sponsored by a coalition of supporters of health care reform, sharply criticized health insurers for hiking their premiums far beyond the rate of medical inflation:
The health insurance industry argues that rising medical costs are to blame for runaway premiums, but it’s clear that they are constantly looking for excuses to raise rates and expand their cash flows. As UnitedHealth said in a formal statement to its investors and analysts, “We run our businesses to produce cash.”25 The industry’s latest campaign against the new law continues its effort to preserve the status quo and expand profits on the backs of average Americans. Premium hikes have surpassed the growth of medical costs, wages and overall inflation (Figures 1 and 2). From 2000 to 2008, premiums for families enrolled in employer- sponsored health plans increased 97 percent, while rates for individuals in workplace health plans climbed 90 percent.26 During that same period, private insurers’ payments to health care providers rose only 72 percent,27 medical inflation increased 39 percent,28 wages grew 29 percent29 and overall inflation climbed 21 percent.30 Health insurers are basing increases on something other than medical inflation, wages or general inflation.
While premiums have been rising faster than inflation, insurers have decreased the portion of premium dollars spent on actual health care services. This is measured by a closely watched indicator known on Wall Street as the medical loss ratio (MLR), and it has been falling as the share devoted to profits, executive pay, marketing, administration, denial of claims and exclusion of sick people has climbed. In 1993, the leading health insurers used about 95 cents of every premium dollar on health care.31 After years of mergers and acquisitions that put much of the U.S. population under the control of a handful of insurers whose shares are traded on Wall Street, that indicator dropped. Investor-owned health insurers have cut spending on actual medical care to around 81 percent.32 For the five largest health insurers, the difference between 81 and 95 percent of premiums in 2009 would equal about $25 billion.33