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Putting Health Care in the Hands of Consumers – Not Insurance Companies

Summary: 
HHS Secretary Kathleen Sebelius takes a hard look at what health insurance companies are doing to their customers, with latest news affecting seniors as well.

As families across the country struggle to make ends meet in this troubled economy, many are getting difficult news: their health insurance premiums are rising. Significantly.  And a new report today indicates that premiums for seniors in Medicare Advantage plans will continue to rise. This is the continuation of an unfortunate trend. Seniors who remained enrolled in their Medicare Advantage plans between 2009 and 2010 have experienced rapidly increasing premiums, at 32 percent on average, with a steeper 78 percent average increase for enrollees in private fee-for-service plans.

But while seniors are suffering, insurance companies are doing better than ever. Humana earned $452.3 million in the fourth quarter of 2009 from its Medicare Advantage plans, compared with $267.3 million a year earlier, a 70 percent increase. At the same time, these companies are being vastly overpaid by the federal government, making huge profits and sticking seniors with higher bills.

This news comes just one day after we at the Department of Health and Human Services released a report showing how insurance companies are driving up premiums at unnecessary, alarming rates.   In California, beneficiaries recently received letters from Anthem Blue Cross announcing their rates would go up as high as 39 percent. Elsewhere, in the last year alone, large insurers have requested premium increases of 56 percent in Michigan, 24 percent in Connecticut, 23 percent in Maine, 20 percent in Oregon and 16 percent in Rhode Island.

What makes this harder to take is that insurance premiums aren’t the only numbers on the rise -- insurance industry profits are also growing by leaps and bounds. The five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – earned combined profits of $12.2 billion in 2009, 56 percent more than the previous year. Moreover, the CEOs of these same companies are each taking home up to $24 million per year.

Insurance companies say that if consumers don’t like it, they can shop elsewhere. Yet we all know that finding a policy on the individual market is not as easy as it sounds. In many cases, insurers can slash your coverage when you need it most. If you have a pre-existing condition, they may deny you coverage altogether.

To show how out of touch insurance companies are with middle-class families, a recent study found that nearly 75 percent of consumers looking for coverage on the individual market never bought a plan – and most of them cited cost as their primary reason. Yet insurers are turning a blind eye. As reported in Arkansas, one Blue Cross plan wanted to increase rates by 28 percent, but regulators forced the plan to settle for just 11 percent. In a broken health care system without competition, transparency, or choice there is little stopping insurance companies from jacking up rates, and putting greater costs onto the backs of working Americans.

Our broken system is working for insurance companies, not families. While profits and premiums are going up, coverage is going down. And three of the top five insurers cut the proportion of premiums they spent on customers' medical care last year, committing more to salaries, administrative expenses, and profits.

Without health insurance reform, we will continue to get more of the same. That is unacceptable.

Reform will protect consumers from abusive insurance industry practices. It will encourage competition among insurance companies in order to drive down costs and offer consumers choices to get the coverage that’s right for them. Reform will also bring down premiums and limit out-of-pocket costs that eat into the family budget.

These efforts won’t just help our health care system – they will also help our economy. Lowering health care costs through reform could generate between 250,000 and 400,000 jobs a year.

It's time we put the health of American families back in the hands of consumers – not the insurance industry.

Kathleen Sebelius is Secretary of Health and Human Services