Obama Turns Up Heat on Insurance Companies

The Obama administration is putting the heat on insurance companies, accusing them of putting profits ahead of health care. Obama has a simple idea: to keep health care premiums down, he wants the federal government to have the power to block rate hikes. "These profits are wildly excessive," said Health and Human Services Secretary Kathleen Sebelius recently. "[They] are way over anybody's estimate."

Republicans – and many health experts – say you can't do much to keep premiums down unless you deal with the underlying problem: the skyrocketing cost of health care.

The Administration's Plan

Under the president's plan, insurance companies would have to justify any future rate increase to a seven-member panel. This panel would be made up of experts on health care economics, consumer representatives, a doctor and someone from the insurance industry. If the panel finds a rate hike excessive, the Health and Human Services secretary would have the power to block the increase.

But will it work? Insurance commissioners in 27 states already have the power to regulate premium hikes and have shown some success in keeping increases in check. Connecticut, for example, rejected Anthem Blue Cross Blue Shield's effort to raise premiums by 24 percent; instead, they went up by 16.5 percent. In Maine, a similar outcome, where Anthem was forced to settle for an 11 percent premium rate hike instead of a proposed 18.5 percent increase.

The increases were lower than the companies wanted but are still much higher than the rate of inflation, which has remained under 5 percent for the last decade.

The Opposition's Plan

Price controls on insurance rates are not the cure-all," says Sandy Praeger of the National Association of Insurance Commissioners. "What we need is meaningful, underlying reforms in the way health care is paid for."

Republicans also say they want to lower costs, but not by using Obama's strategy. They would control costs by placing a limit on malpractice lawsuits and by increasing competition by allowing people to buy insurance policies across state lines.

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