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Democrats want government approval of health premiums

April 20, 2010

Insurers like WellPoint Inc., UnitedHealth Group Inc. and Aetna Inc. should be required to get U.S. approval to increase premiums, Senate health committee chairman Tom Harkin said Tuesday at a hearing.

Legislation signed by President Barack Obama in March requires the companies to explain any “unreasonable” premium increases, though it doesn’t regulate the insurers’ decisions until 2014. Obama criticized a California subsidiary of Indianapolis-based WellPoint in March after the insurer proposed a 39-percent premium increase on some customers.

Senator Diane Feinstein, a California Democrat, has introduced a bill that would empower federal regulators to approve or reject rate hikes. At the hearing, Harkin, an Iowa Democrat, told members of the Senate Health, Education, Labor and Pensions Committee that the United States should enact legislation similar to Feinstein’s proposal.

“We can and should do more,” Harkin said. “If that review determines that premiums are unjustified—that insurance companies are just trying to run up profits—corrective action must be taken,” he said of the premium review proposal.

America’s Health Insurance Plans, the Washington lobbying group representing the medical-insurance industry, opposes federal review of premium changes. In a Nov. 7 letter by the group’s president, Karen Ignagni, insurers said a government rejection of premium increases “could result in insufficient funds being available to pay benefits on behalf of enrollees.”

Ignagni said at the hearing that insurers aren’t to blame for rising premiums. Pharmaceutical companies and medical device makers are responsible for higher insurance costs because of rising prices for their products and their company profits, she said.

“Health care premiums are a symptom, not a cause, of the problem,” Ignagni said.

Drugmakers “are not the driving force behind increasing health insurance premiums,” Ken Johnson, senior vice president for the Pharmaceutical Research and Manufacturers of America, said Tuesday in an e-mail. “Such claims simply aren’t supported by the facts.”

Spending on prescription drugs increased 3 percent in 2008, compared with 10 percent in 2003, according to a 2009 study by the Kaiser Family Foundation, a health policy research organization based in Menlo Park, Calif. Hospital care and physician service costs increased by more than drug costs in 2007 and 2008, according to Kaiser’s analysis of national health data collected by the Centers for Medicare and Medicaid Services, a U.S. government agency.

“Medical devices and diagnostics are not responsible for excessive increases in insurance premiums, Stephen J. Ubl, president and CEO of Advanced Medical Technology, said Tuesday in an e-mail.

About 6 cents of every health-care dollar is spent on medical technology, while devices and diagnostic tools have been “a key factor in increased life expectancy and dramatic reductions in deaths from diseases like heart disease, stroke, and breast cancer,” Ubl said.

Regulations on health insurance were a major part of Obama’s health overhaul, which also contains a mandate on how much of premiums must spend on care.

Passing additional legislation to give the government power to regulate rates was unfinished business from that effort, Feinstein said Tuesday. The proposal initially was included, then stripped out under a procedural rule, she said.

“I’m very worried about it,” Feinstein said. “This is a glaring loophole.”

Harkin said the committee would take up the bill and pass it this year, without offering a specific timeline.

Ignagni said the insurance industry would prefer that lawmakers let changes in the health care overhaul go into effect before adding more regulation.

“All parts of our businesses and operations have been regulated,” Ignagni said. “We think the changes should be allowed to work,” she said.

Obama signed the final piece of the health-care overhaul law on March 30. The legislation is designed to expand health insurance coverage to an estimated 32 million uninsured people, according to the Congressional Budget Office.

The law is expected to cost $940 billion and reduce the deficit by $143 billion over a decade, according to the Congressional Budget Office. Critics think the plan will cost even more and add to the deficit. Democrats in Congress and the administration have said it will also lower the cost of insurance premiums and improve the quality of care.

Under the legislation, state-run market places, called exchanges, will be created beginning in 2014 to allow consumers to choose among health insurance plans. Premium increases can be considered as part of a decision whether to allow a plan to be offered through the exchanges, according to the law.

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