Sebelius: Did You Say Record Profits and Premium Increases?
Filed under: Insurance Companies, Secretary Sebelius
In a post last week, “Insurers’ Profits Swell, Nation Can’t Afford to Get Sick, Can’t Afford to Get Well,” I noted with some distaste that health insurers were said to be looking “for premium increases amidst what [Reed] Abelson describes as ‘flush’ reserve coffers and shareholders ‘rewarded with new dividends.’”
As you might have gleamed from the title of the post, the primary reason for the increased profits was thought to be attributable to “a recessionary mindset” which has led to the insured deferring treatment and thereby not utilizing their health insurance benefits.
As I noted then, despite record profits now, “someday there might be a rainy day” [was/is] a common refrain/justification among insurers.”
Apparently, the Obama administration was none too thrilled with either the prospect of double digit premium increases or the justification. The New York Times reports that
Kathleen Sebelius, the secretary of health and human services, issued a final rule establishing procedures for federal and state insurance experts to scrutinize premiums. Insurers, she said, will have to justify rate increases in an environment in which they are doing well financially, with profits exceeding the expectations of many Wall Street analysts.
“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said. “Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”
PPACA requires annual reviews of “unreasonable increases in premiums.” Starting in September, insurers will need to justify rate increases over 10 percent–with state by state adjustments to that presumptive number the following year. You can read more about the details here, in the Times.