Obama Gets Tough on Insurers, Releases New Regs

June 23, 2010— -- WASHINGTON -- President Barack Obama and Health and Human Services (HHS) Secretary Kathleen Sebelius warned insurance companies not to impose outsize premium increases while healthcare reform is being implemented.

"They shouldn't see it as an opportunity to enact unjustifiable rate increases that don't boost care and inflate their bottom line," the president said in a Tuesday afternoon speech from the White House.

Obama spoke following a meeting with Sebelius, White House officials, state insurance commissioners, and insurance company executives.

In a call with reporters, Sebelius said she is urging state insurance commissioners to investigate suspicious premium increases and said the federal government is also monitoring such increases.

"We wanted to caution insurance companies that rate increases would be watched very closely," Sebelius said, adding that insurance commissioners are very receptive to performing rate reviews in their states.

The Patient Protection and Affordable Care Act (PPACA, also known as the healthcare reform law) doesn't give the federal government explicit authority over the rates that insurance companies charge.

Tuesday's meeting comes a day after the nonprofit Kaiser Family Foundation released the results of a survey that found people who buy health insurance on their own experienced, on average, a 20 percent increase in the cost of their premiums over the past year.

"There is no question that we're seeing rate increases that are way above inflation and those are hard to justify," Sebelius said.

Seven state insurance commissioners; Karen Ignagni, president and CEO of America's Health Insurance Plans; and executives from Blue Cross Blue Shield, Aetna, WellPoint, Kaiser Permanente, Cigna, and Humana were listed on the White House meeting roster.

During the meeting, insurers reminded the administration that overall healthcare costs must be kept down in order for insurance to be more affordable, said Sebelius, who called that an "accurate point."

Obama also announced that his administration issued several guidance regulations for specific patient-focused provisions that are set to become law under the PPACA.

He borrowed a term from an earlier time, calling the collective provisions the "Patients' Bill of Rights."

"Today, I'm announcing that the Departments of Health and Human Services, Labor, and Treasury are issuing new regulations under the Affordable Care Act that will put an end to some of the worst practices in the insurance industry, and put in place the strongest consumer protections in our history -- finally, what amounts to a true Patient's Bill of Rights," Obama said.

One of those regulations bans insurers from denying coverage for children with preexisting medical conditions.

The PPACA is "vague" on what rules insurers are required to follow for such children, said Jeanne Lambrew, director of the Office of Health Reform at HHS, but the new regulation provides some specifics.

It states that insurers cannot deny coverage to a child or young adult under age 19 based on an illness or disease, and they can't carve out specific exclusions. For instance, insurers couldn't specifically deny coverage for chemotherapy for a pediatric cancer patient, explained Lambrew on the media call.

Insurers will prohibited from denying adults coverage based on a preexisting condition beginning Jan. 1, 2014.

The regulations issued Tuesday also deal with a provision in the PPACA that bans insurers from rescinding a policy because of an unintentional mistake on an application for coverage, and another that bans insurers from setting lifetime limits on coverage and restricts their use of annual limits.

Annual limits will be phased out entirely by 2014.

The new regulations also provide guidance on the law's provision that prohibits insurers and employer plans from requiring a referral to see an Ob/Gyn, and a provision that will make it illegal for insurers to charge higher copayments for emergency service that are obtained out of a plan's network.

Most of the measures referenced in the new regulations will go into effect for insurance policies that begin coverage on or after Sept. 23.

One insurance executive at the meeting, Blue Cross Blue Shield president and CEO Scott Serota, said in a statement that the new reform rules that go into effect his year "have the potential to add costs to what we're already experiencing today."

Sebelius said most of the new reform rules will cause premiums to rise "less than 1 percent."

A spokeswoman for Cigna said the insurer is pleased to have had the chance to meet with Sebelius and White House Officials and that the company is still reviewing the regulatory guidance.

On July 1, people with preexisting medical conditions who haven't been able to obtain insurance will be eligible for a new, temporary, high-risk pool called the Pre-existing Condition Insurance Plan.