WASHINGTON – President Barack Obama's top health official on Thursday warned the insurance industry that the administration won't tolerate blaming premium hikes on the new health overhaul law.
"There will be zero tolerance for this type of misinformation and unjustified rate increases," Health and Human Services Secretary Kathleen Sebelius said in a letter to the insurance lobby.
"Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections," Sebelius said. She warned that bad actors may be excluded from new health insurance markets that will open in 2014 under the law. They'd lose out on a big pool of customers, as many as 30 million people nationwide.
The letter to America's Health Insurance Plans was the latest volley in a war of words over who gets the blame for rising premiums. Polls show that many people expect their costs to go up as a result of the law, but there's also widespread mistrust of the insurance industry.
An HHS official said the letter is a pre-emptive move, after the department learned that several smaller carriers around the country are blaming the new law for rate increases this year.
The industry's top lobbyist responded that the health care law is a factor behind higher rates, but not the only one.
"Health insurance premiums are increasing because of soaring prices for medical services, the impact of younger and healthier people dropping their insurance during the weak economy, and additional benefits required under the new law," said Karen Ignagni, president of the insurers' trade group. "It's a basic law of economics that additional benefits incur additional costs."
Sebelius asked Ignagni to help stop "misinformation and scare tactics."
Although the law's big expansion of coverage under the law won't take place until 2014, several new benefits go into effect starting later this month. Lifetime dollar caps on coverage are abolished, and plans must allow parents to keep their children on the policy up to age 26. Many plans will also have to guarantee coverage for children regardless of a medical condition, and provide preventive care with no cost-sharing for the patient.
The administration estimates that those new benefits will raise premiums by no more than 1 to 2 percent. Major benefit consulting companies say the impact will be in the single digits, although it may vary considerably from plan to plan.
"Health plans will continue to do everything they can to incorporate all of these new benefits while keeping health care coverage as affordable as possible for families and employers," Ignagni said.
Unpredictable premium hikes are a constant worry for small businesses and people who buy coverage directly. Employees of large companies are generally shielded from big rate swings from year to year, although their costs also creep up.
Obama used premium hikes to his advantage earlier this year in the final push to get health care overhaul legislation through Congress.
After Anthem Blue Cross sought an increase of as much as 39 percent for some of its California customers who purchase coverage directly, the president made the company into a poster child for insurance problems. California regulators recently approved an increase averaging 14 percent for Anthem customers.
Analysts say the industry is generally in good financial condition this year, and that may help to keep premiums in check.