President Obama Tells Insurance Execs of Constant Premium Hikes: This Is ‘Unacceptable and Unsustainable’

Mar 4, 2010 1:14pm

Jake Tapper and Sunlen Miller report:

As expected, President Obama popped by Health and Human Services Secretary Kathleen Sebelius’ meeting with executives from the five largest health insurance companies.

The news was first broken by White House press secretary Robert Gibbs on twitter, who tweeted: “POTUS went to ins. exec mtg w/ ltr from woman whose insurance will rise 40% nxt yr – more at briefing…"

Asked about Gibbs’ tweet at a stake-out with reporters after the meeting, Sebelius said the president at the meeting “described this as a constituent who had written from Ohio who was a cancer survivor but had been cancer-free for 11 years. Her premiums went up 25% this year. They’re going to go up another 40% in 2010. She is already paying $7,000. Plus most of her medical expenses she is paying out of pocket.”

Sebelius said that the woman, in a letter to the president, “enumerated what she is paying for pharmaceuticals. She has the highest deductible possible and yet she is still seeing these extraordinary rate increases.”

President Obama told the CEOs “this clearly is unacceptable and unsustainable,” Sebelius said.

The HHS Secretary said that the CEOs “admitted that it is unsustainable” after which “we talked about why this market is divided into little bits and pieces. Why sick people are segregated, essentially. And it’s a problem the president addressed at the summit.”

Participants at the meeting were WellPoint, Inc. CEO Angela F. Braly; CIGNA HealthCare, Inc. CEO David M. Cordani; Health Care Service Corporation CEO Patricia Hemingway-Hall; Aetna, Inc. CEO Ronald Allen Williams; and UnitedHealth Group CEO Stephen Hemsley.

The meeting also included various insurance commissioners including Pennsylvania Insurance Commissioner Joel Ario, chair of the National Association of Insurance Commissioners’ health committee; Kansas Insurance Commissioner Sandy Praeger, another chair of NAIC’s health committee; West Virginia Insurance Commissioner Jane Cline, president of NAIC; and NAIC executive director Therese Vaughan.

Praeger gave a ringing endorsement to the administration-backed proposal from Sen. Dianne Feinstein, D-Calif., that would give the HHS Secretary the power to block insurance company premium increases if they don't meet certain criteria in states where regulators do not already have that authority. The new powers are included in the “fix” to the Senate bill that the House and Senate are being asked to pass.

Before the meeting, sitting amongst attendees in the Roosevelt Room, Sebelius told reporters that “the input that I’ve had from people across America who are really frightened that they are priced out of the market, don’t know what’s coming next, want some information about how this is happening and what strategies we have for looking at costs into the future. Because they are terrified that they are next.”

Seated at the table directly across from the Secretary was Angela Braly, the CEO of WellPoint, Exhibit A in the president’s argument that corporate greed is what’s motivating premium increases. WellPoint’s Anthem Blue Cross division recently announced up to 39% rate increases for individual insurance consumers in California, thought WellPoint made $4.7 billion in profits in 2009.

Is it a fair case to make? Certainly no one can easily defend the health insurance industry policies of denying coverage to those with pre-existing conditions or dropping coverage for individuals once they get sick. But Dr. Mark J. Perry, a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan, has noted that, according to data from Yahoo business, the health insurance industry, with an average profit margin of 3.3 percent, is the 86th most profitable industry.

As the Washington Post’s Ezra Klein notes, that’s a lower margin of profit than many other players in health care, such as the pharmaceutical industry (16.5 percent), “health information services (9.3 percent), home health care (8.4 percent), medical labs and research (8.2 percent), medical instruments and supplies (6.8 percent), biotech firms (6.7 percent), and generic drug manufacturers (6.6 percent).”

Secretary Sebelius did not single out the WellPoint’s rate hikes today, but said the problem is broader than just one company. “I think individuals and the smaller market is seeing double-digit rate increases across the board and is one of the reasons why the president is very eager to have a comprehensive health reform bill that among other things has a new marketplace and has a different opportunity for people to be pooled together,” she said.

After the meeting, Sebelius said she’d asked the companies “to follow up with an official letter that they file online their rate requests along with the actuarial data that supports those rate requests: what they’re paying out, what they are collecting for overhead costs, what they’re collecting for administrative costs. So at a minimum until we have comprehensive health  reform, until we have a new marketplace, until we have some rate review and some oversights people at least understand what it is that’s going on.”

“In the meantime we want to shine a bright light and hoping that the CEOS respond to the call for putting their information up in public,” she said. “Put it on a website.”

Sebelius described today as “a step in a conversation I’m hoping will be followed by some greatly increased transparency about what indeed is going on in these marketplaces, why it is that companies who have very healthy profits I think the top companies filed for a $12.7 billion worth of profits in ’09  and pivoted and in this marketplace have filed just dramatic increases.”

– Jake Tapper and Sunlen Miller


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