Dear Ms. Ignagni: How could you be so cold? Think about the children. The chief executive of America's Health Insurance Plans, Karen Ignagni, has been getting a steady flow of sternly worded letters implying as much while the Obama administration begins to implement new restrictions on the way health plans do business and Democrats struggle to make the political case that the healthcare law they passed was worth the trouble and expense.
As reform takes effect, insurers drop child-only policies and threaten more cuts
Behind the volleys of letters, some health insurance companies signaled they would simply get out of business lines that become too troublesome under the regulations taking effect, or drop out of some markets. The dynamic raises the prospect that hospitals and physicians will see coverage options weakened for some patients before the creation in 2014 of insurance exchanges that promise individuals and small businesses a tightly regulated package of essential benefits, the specifics of which are a battle yet to be fought among regulators, insurers and providers.
Last week several companies—including Aetna, Anthem Blue Cross & Blue Shield, Cigna and CoventryOne—said they would stop writing new child-only policies rather than comply with a rule effective last week prohibiting plans from denying coverage for pre-existing conditions. There were also signs that companies would stop offering new individual and family policies if forced to spend at least 80% of premiums on medical care and quality-improvement initiatives, a formula known as the medical loss ratio. A recent letter that HHS Secretary Kathleen Sebelius sent to Ignagni and publicized in a news release accused AHIP's members of falsely blaming the Patient Protection and Affordable Care Act for rate increases. “I urge you to inform your members that there will be zero tolerance for this type of misinformation and unjustified rate increases,” Sebelius wrote.
Ignagni responded in a statement that “it's a basic law of economics that additional benefits incur additional costs.” Health plans are raising rates, she said, “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.”
AHIP declined requests for an interview with Ignagni, who ranked 21st among Modern Healthcare's 100 Most Powerful People in Healthcare this year.
U.S. Rep. Pete Stark (D-Calif.), chairman of the House Ways and Means Health Subcommittee, piled on with a letter to Ignagni shaming AHIP members for raising rates while making big profits and lavishly compensating executives, writing, “As long as we are abiding by the basic laws of economics, we can all agree that with bigger profits should come lower premiums.” Then Sen. Max Baucus (D-Mont.) and Sen. Jay Rockefeller (D-W.Va.) sent a finger-wagger to the executives of the largest insurance companies, demanding more transparency in premium increases.
AHIP seeks to draw providers into the fray when asked to explain rising premiums and answer the charge that health plans pocket members' money rather than spending it on medical care. The group argues that the percentage of premiums covering administrative costs has fallen slightly while spending on hospital and physician services climbed an average of 7% a year in the past decade.
Texas cardiologist J. James Rohack, immediate past president of the American Medical Association, said AHIP's “math doesn't make sense.”
“The concern the AMA has when we hear that is the evidence says U.S. healthcare spending (growth) slowed to 4.4% last year, which is the slowest rate of growth in nearly 50 years,” Rohack said. “Spending for physician and clinical services specifically only grew 5%. Then you have insurers like Anthem saying we have to have a 39% increase to cover rising costs.”
The American Hospital Association has responded that spending on hospital care is driven by rising costs that hospitals bear for labor and other goods and services, including technology, as well as more utilization of their services.
According to HHS, the inclusion of high-cost patients in coverage pools would reduce the burden of uncompensated care and thus reduce the shifting of those costs to the insured population by $1 billion by 2013. And HHS predicts that requiring preventive care at no cost to patients will reduce costs to insurers attributed to avoidable hospitalizations.
“All these things are good policies that expand access to coverage,” said Don May, vice president for policy with the AHA. Hospitals, however, aren't going to see much of an impact in these early reforms as they will later, when broad coverage expansions and delivery system reforms start to kick in, he said.
The dispute over coverage for children's pre-existing conditions arose soon after the law passed, prompting HHS to issue guidance this summer allowing insurers to limit applications for child policies to enrollment windows in order to mitigate the incentive for parents to wait until their children get sick to buy insurance. With the promise of that guidance, Ignagni had sent a letter to Sebelius on March 29 that the administration describes as a pledge that AHIP members have now reneged on.
“Not at all,” responded AHIP spokesman Robert Zirkelbach. The companies, he said, have always held that HHS needs to make all companies adopt the same enrollment window. “If it's not uniform, it still allows people to be able to purchase insurance only when they felt they needed it.”
An HHS spokeswoman said the administration would consider issuing further guidance as it works to “maintain a balance between access to coverage for children with pre-existing conditions and choice of policies for all children.”
The policies cover a tiny sliver of children in the U.S., and children covered by them now would not be affected. Nonetheless, the dispute illustrated the dilemmas that will arise as the provisions of the reform law pull at strings in a complicated business.
President Barack Obama met privately last week with 34 members of the National Association of Insurance Commissioners. Afterward, the group's leaders told reporters that they relayed a concern that the markets for individual coverage in their states could be disrupted if carriers comply with a rule for new policies that at least 80% of premiums collected go toward medical care or quality- improvement initiatives.
Iowa and Maine are seeking waivers that would allow companies in those states to phase in the requirement.
Florida Insurance Commissioner Kevin McCarty said HHS had asked him to collect evidence from insurers demonstrating the hardship the 80% medical loss ratio would cause them. “We have a robust, competitive market, and we think we could lose some of those players,” McCarty told reporters. “I think there's a paradigm shift with this law,” he said. “Some may have to adjust their business plan or perish.”
Jay Angoff, director of HHS' office of consumer information and insurance oversight, said in a written statement that the department would give “full consideration” when it receives the NAIC's formal recommendations on the matter at the end of October. HHS plans to issue regulations this fall requiring state or federal review of potentially unreasonable rate increases. Even without these coming rules in place to scrutinize and challenge rate increases, some insurers have retreated from them in the face of public floggings and pressure from state regulators.
This month, Anthem in Colorado—without conceding its increases were unreasonable—agreed to refund $20 million to subscribers under a settlement with the state's insurance division, which challenged the company after logging 210 complaints about increases in individual plans.
In North Carolina last week, the insurance department announced enrollees of the state's Blue Cross & Blue Shield individual plans would be refunded $156 million from a reserve set aside for future claims. The refund was made possible because those plans will effectively end in 2014 when new products are introduced under the reform law. The state's insurance commissioner also said Blues enrollees would save $14.5 million because the department knocked down a requested 6.97% rate increase to 5.37%.
Last week at a backyard rally in Falls Church, Va., on the eve of the six-month anniversary of the Patient Protection and Affordable Care Act, Obama made clear the administration will paint Republicans whose midterm campaigns are staked on repealing or chipping away at the law as beholden to insurance companies, and that insurance companies that don't fall in line will be portrayed as choosing profits over patients.
“I want them to look you in the eye and say, ‘Gail, I'm sorry, you can't buy health insurance,' ” Obama said to supporter Gail O'Brien in reference to the calls for repeal. O'Brien, who said she was more worried about paying her bills than her cancer when she was diagnosed with non-Hodgkin's lymphoma, was able to get coverage through New Hampshire's high-risk pool established under the reform law.
“So all these things are designed not to have government more involved in healthcare; they're designed to make sure that you have basic protections in your interactions with your insurance company,” Obama said.
—with Jennifer Lubell
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