Health and Human Services Secretary Kathleen Sebelius has written a letter to AHIP President and CEO Karen Ignagni chastising the insurance lobby for blaming the recent insurance premium increases on the early benefits in the health care law — provisions that “were fully supported by AHIP and its member companies,” the letter points out.

Noting that “any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal,” Sebelius also warns AHIP that the federal government will not sit idly by as insurers blame the health care law for the premium increases:

Moreover, I want AHIP’s members to be put on notice: the Administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections.

Already my Department has provided 46 states with resources to strengthen the review and transparency of proposed premiums. Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers. We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014. Simply stated, we will not stad idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

Indeed, the rate review grants should help sates review unreasonable increases, but there is very little the federal government can actually do to reign in unreasonable rates; that burden falls to the states. And, given the influence of insurers on some state commissioners and the weak state regulatory structure — 23 states do not review and approve premium changes in the individual market and 5 of those 23 have no rate regulations at all — it’s clear that the federal government needs to find new ways to entice the states to strengthen their rate review processes.

Absent passing some kind of federal rate review legislation, HHS can attach thicker and longer strings to the next round of rate review grants. For instance, it can require that states adopt a strict prior review process that would give regulators the authority to deny “unreasonable” increases. That would encourage states to pass additional legislation (no easy task) but given the amount of interest in the first round of rate review dollars, those kind of conditions could at least spark legislative activity in the right direction. Obviously the feds could target the next round of rate review grants “to states that appear the most promising in terms of greater rate review, oversight, and enforcement,” Edwin Park, co-director of health policy at the Center on Budget and Policy Priorities told me in an email. “This would include not only states with an existing robust process but those states needing the most help but also the most willing to institute strong rate reviews.”

Park says that the federal government can also make it easier to conduct reviews by purchasing systems, establishing common procedures, and help states find actuaries to review insurance rates.

Finally, the federal government can work very closely with the states to ensure that insurers with unreasonable increases between now and 2014 are actually excluded from the exchanges and states can of course keep inefficient and costly issuers out of the exchanges.

This morning, AHIP President and CEO Karen Ignagni appeared on Fox News to defend the notion that the health care law is substantially contributing to skyrocketing premiums. Insisting, quite correctly, that premium growth follows health care costs, Ignagni stressed that the law’s early benefits are similarly raising rates:

IGNAGNI: Health care premiums follow underlying costs. Costs are going up because providers are charging more, number one…two, people buying coverage individually in a bad economy have decided for their economic reasons they sometimes is no longer afford it, that means the cost to people in the pool goes up because it’s the people who have the highest cost who stay in. And then third, we’re adding new benefits, starting September 23rd, under the legislation, and new benefits follow cost. [...]

Our members are working very, very hard to try to do things as affordably as possible but for people who have coverage now, many of them are going to see increased coverage requirements, new benefits, new requirements, and that will require additional costs. Our members are trying to do this as affordably as possible.

Watch it:

One question Hemmer should have asked is just how much these “new benefits” cost. Because according to the folks at the Urban Institute the so-called September 23rd provisions could lead to increases of no more than 3% — and that’s the very highest estimates. Why then are insurers attributing 9% spikes to the health care law? And, if they’re doing everything they can to keep rates affordable, why are they so opposed to a bill that would allow the federal government to review their annual increases?

The duality of Ignagni’s argument is also striking. During this segment and throughout the health care reform debate, insurers insisted that they support market reforms — some of these are the September 23rd provisions you’re hearing about, getting rid of lifetime limits, eliminating recessions, and discrimination against kids with pre-existing conditions. So long as the law required everyone to purchase private health insurance coverage, they were on board. The mandate we got may not be as robust as insurers would have liked, but any kind of requirement would have taken several years to implement. Knowing all this, insurers talked up their support for market reforms to publicly present themselves as favorable towards regulation and change. Now, they’re using those very same provisions to exaggerate their premium requests.

Interestingly, following the passage of reform, insurers promised to cooperate with the implementation process. “Health care reform is not over. This is the only the end of the beginning,” Mike Tuffin, executive VP of AHIP said in June. “Whether we like it or not, the bill was passed. Now we must be reliable and effective implementation partners. We need to stay engaged. ”

Despite the GOP’s doomsday predictions about the health care law dramatically increasing health care costs, a new report from the Center for Medicare & Medicaid Services (CMS) predicts health spending will grow only “slightly faster than projected under prior law – at an annual rate of 6.3 percent, rather than 6.1 percent” — a fairly small price to pay for providing insurance coverage to 32.5 million more Americans. By 2019, health spending will “increase as a share of the economy by only 0.3 percentage points, to 19.6 percent of GDP,” the government found. Here is what it looks like:

To expand coverage to millions of Americans without significantly altering spending growth trends requires efficiences, and the law delivers. Beginning in 2014, as 30 million+ individuals begin receiving health care coverage and visiting doctors, health care expenditures will naturally increase. Costs will continue to grow higher than current law until around 2015, at which point the law’s efficiencies kick in — Medicare savings, the excise tax on so-called Cadillac health plans, the Medicare payment board — and costs begin to “decelerate.” As you can tell from the graph, between 2017 and 2019 the red line is below the blue line — the annual growth rate is decreased under reform for that period.

Moreover, the actuaries predict that as a result of these savings, Medicare spending will decline $86.4 billion from previous projections due to reforms. “Specifically, average annual Medicare spending growth is anticipated to be 1.4 percentage points slower for 2012–19 than we projected in February 2010. By 2019, it is projected to grow 7.7 percent—0.9 percentage point more slowly than we projected in February 2010,” the report concludes.

Now, reform bends the cost curve for national health spending, but what this means for private health insurance premiums is more complex. As Merrill Goozner points out, “the private insurance market will absorb most of the increase, and most of that will fall on individuals.” The actuaries are projecting a “9 percent increase in out-of-pocket expenses in 2018 and 2019″ as employers switch plans to avoid the Cadillac tax.

On the whole, however, this represents a fairly striking achievement and places the country on track to further lowering health care spending in the out-years. Much will depend on Congress’ commitment to maintaining the law’s cost savings and efficiencies — which the CMS may actually be under estimating — after all, they’re the only ways we can afford this kind of coverage expansion.