Sebelius Says Cost Of Patients’ Bill Of Rights Should Have Small Impact On Premiums

sebeliuslookingright6Earlier today, I expressed concern that the new ‘Patient Bill of Rights’ regulations would give insurers an excuse to raise premiums while leaving the federal government relatively powerless to rein in excessive and unreasonable increases. But this afternoon, during a conference call with reporters, HHS Secretary Kathleen Sebelius stressed that the added cost of the new regulations would only amount to “less than 1%” in added costs:

SEBELIUS: We anticipate that the cumulative impact is likely to be less than 1%. The actuarial studies that our folks have asked to engage in, looking at this indicates that while there are clearly some cases where there are some expenses, relatively few and far in between given the number of people impacted and effected. Again, part of the meeting today was to call on insurance companies to use their market strategies to put people in larger pools to make sure that folks particularly in the individual and small pool markets weren’t isolated and separated as the sickest possible population.

During his remarks, President Obama conceded that while “there are genuine cost-drivers that are not caused by insurance companies,” “we’ve got to make sure that this new law is not being used as an excuse to simply drive up costs.” “None of this is designed to deprive insurance companies of fair rates. And as I mentioned when we were meeting with the CEOs, there are a lot of cost-drivers other than those that are within insurance companies’ control,” he said.

This is true enough, but many insurers simply pass overinflated costs to consumers, without negotiating for better rates, and some are already blaming the health law for premium increases. For instance, in March, CIGNA CEO David Cordani told Neil Cavuto that the law will lead to additional increases and Aetna CEO Ron Williams argued that the new taxes — which don’t kick in until 2014will lead to immediate premium hikes. As Sebelius explained on the call, this kind of response is fairly typical:

SEBELIUS: There is no question that we are seeing rate increases that so far exceed the costs of medical inflation in some instances that they’re difficult to justify….In my former insurance commissioner days [I] am very familiar with companies alleging costs well in access of what they ended up being every single mandate passed in my experience at the legislative level was always estimated to be well more costly than tended to be the reality. When we passed mental health parity there were assertions that somehow rates would have to go 20% to cover this. This isn’t new, this tension and dynamic. The new is we are actually calling on insurance commissioners to step up to actually conduct more rigorous rate reviews.

History suggests that insurance commissioners will in fact have to remain vigilante in challenging and reviewing proposed rates. If they don’t, I suspect rates will continue to increase well beyond medical inflation and the “estimated cumulative effect.”