To advance healthcare reform, Obama comes down on insurers

In his healthcare reform rally in Pennsylvania Monday, Obama vilified insurance companies for denying coverage and raising premiums. In defense, the insurance industry cites soaring costs.

Charles Dharapak/AP
President Barack Obama speaks about healthcare reform at Arcadia University in Glenside, Pa. on Monday.

Don’t shoot the messenger. That’s the response of insurance industries to the latest broadside from the White House on the role of insurance policy hikes in soaring healthcare costs.

In a speech on Monday, President Obama charged that insurance companies have made a calculation that they can deny coverage for preexisting conditions, drop coverage when people need it most, and make big profits “as long as they can get away with it.”

“Since there’s so little competition in the insurance industry, they’re OK with people being priced out of health insurance because they’ll still make more by raising premiums on the customers they have,” Mr. Obama said, during remarks at Arcadia University in Glenside, Pa.

In support of this view, the president cited a recent conference call with investors organized by Goldman Sachs that recommended buying insurance company stock because of the potential for big profits.

In a statement on Monday, House Speaker Nancy Pelosi also referenced the Goldman Sachs conference call. “In fact, Goldman Sachs is recommending that investors buy shares in two big insurance companies – the UnitedHealth Group and Cigna – because the potential for profit is high,” Speaker Pelosi said.

In response, insurance companies say the cost of an insurance policy reflects the soaring costs of healthcare – costs they say the Obama White House is not reining in with its proposed healthcare reform.

“For every dollar spent on healthcare in America, less than one penny goes toward health plan profits,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, in a statement after Obama’s remarks at Arcadia University. “The focus needs to be on the other 99 cents.”

America's Health Insurance Plans is an advocacy group that represents health insurance providers.

By vilifying insurance companies “for political reasons,” Obama is shooting the messenger, Mr. Zirkelbach added in an interview. “All the focus is on health insurance premiums with very little focus on the underlying medical costs that are driving those increases.” Drug companies and hospitals are more significant drivers of healthcare increases, he adds.

According to the Centers for Medicare and Medicaid Services, health plan costs increased 73.5 percent from 2000 to 2009. That compares with 104.2 percent for prescription drugs, 82.8 percent for physician and clinical services, 82.5 percent for hospital care, and 82.7 percent for total national health expenditures, over the same period.

But 10-year averages do not capture the sharp increases consumers have seen from companies such as Anthem Blue Cross in California, which recently announced increases of 39 percent. Obama and Democratic leaders on Capitol Hill have seized on this announcement as Exhibit A for why Congress needs to act.

In a letter to leading insurance companies on Monday, US Department of Health and Human Services Secretary Kathleen Sebelius called on the CEOs of Aetna Inc., CIGNA HealthCare Inc., Health Care Service Corp., UnitedHealth Group Inc., and WellPoint Inc. to publicly justify proposed premium increases.

She urged companies to “post on your websites the justification for any individual or small group rate increases you have implemented or proposed in 2010, and continue to post such a justification in connection with any future increases.

“Posting this information will give Americans the opportunity to learn more and ask questions about rate increases that affect them,” Ms. Sebelius wrote.

Health policy analysts in a recent conference call with Anthem Blue Cross also pressed for this information. “There is a valid analytical point for why rates might be going up at this particular time,” says Henry Aaron, a senior fellow at the Brookings Institution in Washington.

For example: In hard economic times, when consumers have to cut their own costs, “Are you more likely to drop your coverage if you’re a healthy youngster or a sickly middle-aged person,” Mr. Aaron asks. One reason insurance companies are raising premiums now could be that their own costs are higher because healthy, younger people are opting out of the insurance pool as a cost-cutting measure.

“The don’t-shoot-the-messenger point has real plausibility,” Aaron says. But it’s important to see the data supporting it, he added.

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