Sebelius' Letter to Insurance CEOs Calls for Justification of Premium Hikes

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Recent insurance rate hikes have been steep in several states with rates rising up to 39% for individuals in California. The outrage which has followed these insurance rate hikes has prompted U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius to send a letter to the CEOs of UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Health Care Service Corporation and CIGNA HealthCare Inc.

The letter from Secretary Sebelius calls on the executives to publicly justify the proposed health insurance premium increases. It comes just one week after meeting with the insurance executives at the White House.

Sebelius states, "Last Thursday, I asked CEOs to post online the actuarial justification for premium hikes so consumers can see why their premiums are skyrocketing. Now, it's time for these insurance company CEOs to do their part to make the system more transparent for the American people. If insurance companies are going to raise rates, the least they can do is tell us why."

The letter also comes shortly after a new analysis from Goldman Sachs found that competition in the insurance market is so weak, insurance companies can continue to raise rates even if it means losing customers. The Goldman Sachs analysis found that "price competition is down" and that "incumbent carriers seem more willing than ever to walk away from existing business."

Here is a copy of Sebelius' letter to the executives:
Dear__________,
Thank you for taking the time to join our discussion about health insurance premium increases on Thursday at the White House. There is no question that our health insurance system is broken, and unsustainable for both the American people and your companies. I appreciated the opportunity to meet with you and discuss these very serious issues.

As we discussed, both the President and I continue to hear from concerned Americans who don't understand why their premiums continue to rise. For many families, these high premiums have made health insurance unaffordable. At the same time, these families have heard reports of insurance companies taking in multi-billion dollar profits.

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At our meeting, you and your colleagues discussed the importance of addressing and controlling the underlying cost of health care. President Obama agrees, and his comprehensive health reform proposal includes a series of cost-reduction strategies. You noted the need for a larger pool of insured individuals to balance risks. This element is also included in the President's proposal.

In our discussion, we also agreed that we will all benefit by making our health care system more open and transparent. To that end, I am reiterating the request I made at our meeting on Thursday: post on your websites the justification for any individual or small group rate increases you have implemented or proposed in 2010, and continue to post such a justification in connection with any future increases. Posting this information will give Americans the opportunity to learn more and ask questions about rate increases that affect them.

At a minimum, I ask that you include the following in your justification:
1. Your estimates on medical cost and utilization increases, the assumptions driving these estimates, and the basis for those assumptions.
2. If your premiums increase more than estimated medical costs, a description of what accounts for those differences.
3. The number of people who will be receiving premium increases, as well as the number of people who will be receiving different levels of premium increases, further broken down by characteristics including plan type, age, and sex.
4. Enrollment changes in your different plans since the past year.
5. The number of people on whose experience the rate increase is calculated.
6. Any premium rating variation including rating variation by age and health status.
7. An affordability plan explaining what the company is doing to improve the affordability of health care, and the estimated financial impact of the company's affordability initiatives.
8. An explanation of any cost containment or quality improvement efforts you have made that affect the increase.
9. The expected medical loss ratio resulting from any premium
increase.
10. Information on the percentage of premium revenues you spend on medical claims, disease management, quality initiatives, administrative costs, profits, and executive salaries broken down at least by market type.

The President is committed to passing health insurance reform that fixes our health insurance system and helps bring down costs for all Americans. These reforms will give American families the peace of mind they need and deserve, and will make our system more transparent. I hope your company will join our effort to make health care in America more transparent, and post this critical information without delay.

Sincerely,
Kathleen Sebelius

Related stories
Sebelius Summons UnitedHealth, Aetna, WellPoint Over Premium Hikes
Health Insurance Increase Shows Insurer Problems, Attracts Scrutiny
WH Health Care Bill Seeks to Limit Insurance Price Hike
The President Asks Health Insurance Providers for Transparency

Source
HHS Press Office

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