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Feds fire warning shot to health insurers
December 21st, 2010
12:55 PM ET

Feds fire warning shot to health insurers

Health insurance companies trying to bump up rates by more than 10 percent will have to answer to federal regulators, according to a new plan announced by Health and Human Services Secretary Kathleen Sebelius Tuesday.  The proposed rule explains how the government will oversee insurers as required by the massive health care bill – the Affordable Care Act – that was signed into law this spring.

After 2011, regulators will decide on a state-by-state basis which rates will be reviewed.

The process will determine which rate hikes are “unreasonable,” a tricky definition since “a 10 percent increase by a company that’s not had a rate increase in five years and is looking at a narrow profit margin, is not necessarily the same as a company that’s raised rates three years in a row and is looking at fat profits,” Sebelius said. “We decided we would start somewhere and we went with 10 percent, not as a definition of unreasonable, but as a figure that would bring scrutiny.”

As part of the scrutiny, proposals for large rate hikes will be posted online, along with each company’s justification for the increase.  A significant number of plans are likely to be affected; according to HHS,  hikes greater than 10 percent make up the majority of rate increases in the individual market over the past three years.

The new federal requirement does not replace but adds a layer to various state laws regulating insurers.  According to HHS, 43 of 50 states currently review health insurance rates.  In states without “an effective process,” HHS will conduct the review, said spokeswoman Jessica Santillo.

While federal regulators won’t have the power to block rate increases, insurers whose rate hikes are deemed “unreasonable” could be barred from insurance “exchanges” – the planned marketplaces where many companies and consumers will purchase coverage plans, starting in 2014.

The online postings will also discourage sharp hikes by making consumers better informed, Sebelius said.

Insurance companies and the public have 60 days to comment on the rules, before the new regulations take effect.


soundoff (155 Responses)
  1. Paul

    Unfortunately the average person is grossly ignorant of what Health Insurance is and how it works. HI increases are the effect of all the costs that are incurred to provide the medical coverage. Each year hospitals, physicians, drug companies raise their prices and those are then passed on. What compounds the cost at this point is that most consumers want the most expensive drug, imaging, procedure, etc without regard to the long term implications which are significantly increased premiums.
    A good example of where consumers pay attention is with their auto insurance. If the cost of the repair is within close range of their deductible they will not report it because....wait for it.......their insurance will get jacked up. In HI consumers have no skin in the game until the renewal comes and then they say "wow can you believe the increase? I don't understand why!" Essentially the average consumer treats HI like an open ended credit card with no accountability.
    BTW – The average profit margin of HI companies in the US is less than 3%. Check out the margins of Intel, Nike, Exxon, etc.
    What continues to amaze me is the amount of false information spread by completely unqualified individuals who know almost nothing about the economics of this business but believe the endless BS that Obamacare has set forth......don't get me started on the trainwreck that Sebelius is perpetuating.......we are close to reaching a fascist state as the government attempts to control every single aspect of this industry in a non-collaborative dictorial style......You have only seen the beginning of the costs the government will incur to deliver this bomb and it will all come out taxes and premiums.

    December 21, 2010 at 16:41 | Report abuse | Reply
    • RG

      Spreading false information? What are the margins of the pharmaceuticl companies? Are we lying by omission Paul? Any more Republican propaganda you'd like to throw in?

      December 21, 2010 at 18:24 | Report abuse |
    • Valerie

      Paul, I understand what you're saying, but ask yourself this: If insurance companies are just scraping by with tiny profit margins, then how in the world can they afford such monumental structures in which to do business out of? I mean, have you seen the enormous buildings with the immaculate landscaping? Some of them are like cathedrals.

      December 22, 2010 at 06:20 | Report abuse |
  2. Clark1b

    greed within the insurance companies on one side

    and power hungry egos within the government on the other side

    December 21, 2010 at 18:00 | Report abuse | Reply
  3. Mike

    How did health insurance ever get started and why is it tied to your job in most cases. What has your job got to do with your health? Seem like the socialist countries have it right.

    December 21, 2010 at 18:16 | Report abuse | Reply
    • Valerie

      During WWII, when there was a shortage of workers here at home, employers were not allowed to offer more money due to labor unions or some other form of regulation, so they began offering health benefits, which seemed a good fit since so many jobs were factory jobs.

      December 22, 2010 at 06:17 | Report abuse |
    • Annoix

      Health insurance was first offered as a benefit to attract good workers, along with vacation time and bonuses and perks like that. It doesn't have anything to do with work, other than helping the employees stay healthy and productive.

      December 22, 2010 at 07:00 | Report abuse |
  4. RG

    Is this a joke? A 10% raise in THIS economy is not seen as excessive? My company has changed carriers for the last 3 years, as the increase from 2 years ago was over 40%, and last year's clowns asked for a 61% increase, before they were replaced.

    December 21, 2010 at 18:21 | Report abuse | Reply
    • Paul

      That is because the costs for your employer are through the roof!! Think about it..... for example, somebody who gets divorced many times(your company has to move carrier to carrier, why?) probably has an underlying reason that they always blame on the other person(HI carrier), it is never their problem, it must be the other person or company's issue......your company more than likely has super rich benefits, highly irresponsible utilizers(get in high cost accidents and expect a Honda for a BMW in return) and the only way to get around it is to blame someone else(insert name of HI here..) .
      Get the picture?

      December 21, 2010 at 21:24 | Report abuse |
  5. JonF

    Well,my insurance went up 28% in 2010 alone – since the health care bill passed, in fact. I am not kidding. It went from $3900 per month, to $5400 per month. California does nothing to stop it. We are declined by all other companies because of claims – but never warranting $5400 a months for two people! If you are on an individual policy you are out of luck – and will be until at least 2014 – if we are lucky.

    December 21, 2010 at 22:18 | Report abuse | Reply
    • Lynn

      Wait til after the first of the year and get some new quotes

      December 22, 2010 at 00:21 | Report abuse |
  6. Bob

    Why does the government want to mandate Health Insurance.. Skeptic: The more people that have health insurance the more people can pay for hospitals, medications, Drs fees etc... Humanatarian:: Because our government represents the people, and many of our citizens can not get proper medical care because they have no insurance.

    December 21, 2010 at 22:23 | Report abuse | Reply
  7. Lynn

    They're already ripping off the brokers for 10% sounds like double dipping to me

    December 22, 2010 at 00:19 | Report abuse | Reply
  8. andrewthoone

    In fact, under new health care reform your health insurance company will no longer be allowed to cancel your policy if you get sick, we should be doing this already! search online "Wise Health Insurance" it is a good place to find insurance if you have illness like me.

    December 22, 2010 at 01:03 | Report abuse | Reply
  9. Me

    RETARDED PPL and RICH PPL VOTE REPUBLICAN:

    Because if you are not RICH AND YOU VOTE REPUBLICAN YOU ARE VOTING FOR THE RICH THAT MAKES YOU RETARDED.

    December 22, 2010 at 02:11 | Report abuse | Reply
  10. gary

    My rate went up 150% for 2011 blue cross of alabama blue advantage.Some doctors co pay up 166%.Do the doctors get
    any of the 166%.this is a crime.That is a lot more than 10% needs to be checked out buy the Government. But will not be.

    December 22, 2010 at 03:30 | Report abuse | Reply
  11. Annoix

    I saw this coming a mile away, and I'm not a genius by any means. I was stupid enough to believe that Obama's plan to have every American citizen have health coverage meant lower, affordable plans for those that can't afford much. But no- it meant we would be forced to get health insurance even though we can't afford it now. Of course the health insurance companies are going to raise their rates, with all that new mandated business waiting for them. Duh, it's a no-brainer! I was paying around $100 a month for temporary insurance last year- that same policy today (which I can no longer afford) is now $170 a month. Maybe the next president will be able to fix Obama's messes, but it will probably be too late.

    December 22, 2010 at 06:56 | Report abuse | Reply
  12. Chris

    I've had a $50 increase every 6 months for several years untill this last renewal. Wonder if the new law had anything to do with that!

    December 22, 2010 at 08:35 | Report abuse | Reply
  13. Secret Insurance Man

    REPUBLICAN LIE – republicans kept acting like being able to purchase plans across state borders was the answer. THIS SOLVES NOTHING. Everyday I work with groups whose insurance plans are written out of IL but the members live in Indiana. Companies can already do this... further... your rates are created by the zip code your company lives in. So I want to know what the h-e- double hockey sticks are the republicans thinking? Do they not even understand health care laws?

    December 22, 2010 at 09:13 | Report abuse | Reply
  14. maine liberal

    Stop blaming Obama and look towards the real pr0oblem. Its the insurance companies.

    Blue Cross and Blue Shield in Maine, a subsidiary of WellPoint, the nation's largest insurer, wanted the state to approve an average rate hike of 18.5 percent on its policyholders. Maine rejected the increase and now the insurer is fighting for the hike in court.

    In its filing, Anthem said it had lost $3.7 million on its individual insurance products over the past five years. The AG says Anthem has made $5.4 million from individual consumers over the past two years, and points out that Anthem paid $75.7 million in dividends to WellPoint in 2008, $40.4 million in 2007, and $35.6 million in 2006. And its executives paid themselves pretty well, too.

    "In addition to the average annual premium of approximately $6,000 paid by Maine consumers to Anthem in 2008, these same individuals paid their own health care costs below the deductible. The average deductible as $7,250 in that year, and is projected to grow to an average of $7,570 in 2009... That means the average policyholder would have to incure a total cost of more than $13,000 in premium and deductibles, prior to becoming eligible to receive any health benefits under the policy."

    The filing states that with the rate increase, Anthem's 12,000 policyholders in Maine "would have paid an additional $12 million in annual premium for the same level of benefits."

    December 22, 2010 at 09:15 | Report abuse | Reply
    • Nota RealName

      If you are going to cut and paste from a Huffington post hit piece from 2009, you sould cite your source.

      December 22, 2010 at 10:53 | Report abuse |
  15. Tommas

    IRS is doing their job.

    December 22, 2010 at 10:55 | Report abuse | Reply
  16. Beth

    Where is the Tea Party when we need them?

    December 22, 2010 at 11:05 | Report abuse | Reply
  17. ChristineWithRegence

    All parties, including insurers, have a role to play in helping to control health care costs. Check out Whatstherealcost.org for what you can do and what the health care system should be doing

    December 25, 2010 at 10:57 | Report abuse | Reply
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