* Administration releases rules for consumer protections
* Industry: focus on other health industries needed
* HHS says new rules to raise rates less than 1 pct
* Insurers' shares down 2.5 percent
(Adds Aetna CEO, industry reaction, updates with shares
By Lisa Lambert and Susan Heavey
WASHINGTON, June 22 President Barack Obama
warned U.S. insurance firms on Tuesday not to use his
healthcare overhaul as an opportunity to push through big rate
increases and said the federal government would work with
states to monitor them.
"Insurance companies ... shouldn't see it as an opportunity
to enact unjustifiable rate increases," Obama said, after
meeting with state officials and insurance company executives.
Obama's caution to the multibillion dollar industry comes
as Democrats prepare for a difficult battle to retain their
majority in Congress ahead of the November mid-term elections.
His warning also further put health insurance companies on the
defensive and pressured their shares.
The chief executive officers from major insurers such as
Aetna Inc (AET.N), Cigna Corp (CI.N) and WellPoint Inc WLP.N
attended the roughly 90-minute meeting. Afterward, companies
stressed that although they will follow the new rules, costs
for consumers are likely to continue to rise.
"I think there was a recognition that consumers are going
to get more. When you get more, you pay more," Aetna's CEO
Ronald Williams told Reuters after the meeting.
Obama acknowledged that there are "genuine cost drivers
that are not caused by insurance companies" but said companies
must still publicly justify any rate increases on both the
federal health website and their own.
He also pointed to states such as Maine, Pennsylvania and
New York that are addressing sudden spikes in health insurance
rates that he said underscored the need for the landmark
healthcare reform legislation passed three months ago.
Pennsylvania is investigating the state's nine largest
health insurers over rate increases that Governor Edward
Rendell called exorbitant while California officials have
investigated WellPoint's proposed increases of as much as 39
percent that the insurer later called a mistake.
Obama's warning followed a Kaiser Family Foundation report
that showed health insurers are raising prices by an average of
20 percent for working-age adults who buy their own policies.
His administration also released new regulations on Tuesday
detailing consumer protections set to take effect in September.
Obama said that "will put an end to some of the worst practices
in the health insurance industry and put in place the strongest
consumer protections in our history."
The rules will protect children with preexisting conditions
from being denied healthcare insurance, stop insurance
companies from canceling coverage, except in some cases, and
prohibit lifetime limits. Wider changes take effect in 2014.
PATIENTS BILL OF RIGHTS
Obama called the regulations a "Patient's Bill of Rights,"
but insurers said they may increase the price of healthcare.
"These rules have the potential to add costs to what we're
already experiencing today," Blue Cross and Blue Shield
Association President and CEO Scott Serota said in a
U.S. Health Secretary Kathleen Sebelius said the
administration estimates that premiums will rise by less than 1
percent on average as a result of the new regulations.
Three months ago, Congress passed an overhaul of health
insurance intended to ensure that every American has access to
healthcare and is expected to expand coverage to more than 30
million uninsured Americans over the next few years.
"While we want solvent insurance companies and we want to
make sure that the private market is stable, we also want to
make sure consumers are protected against excessive rate
increases," Sebelius said. She also urged state insurance
commissioners to investigate premium problems and said her
department would monitor them as well.
"We wanted to caution insurance companies that rate
increases would be watched very closely," she said.
Democrats and various consumer advocacy groups hailed the
new rules to back the merits of the health care law, which
Republicans have vowed to overturn as they campaign to win back
more congressional seats.
Shares of health insurers, which have swung over the last
18 months alongside the volatile healthcare debate,
underperformed the overall market after Obama's remarks.
Despite the new rules, some advocates and Wall Street analysts
have said companies could eventually gain millions of new
The Morgan Stanley Healthcare Payor Index .HMO and the
S&P Managed Healthcare Index .GSPHMO closed down 2.5 percent
and 2.2 percent respectively on Tuesday while the overall S&P
500 Index .SPX ended down just 1.6 percent.
(Reporting by Lisa Lambert and Susan Heavey; additional
reporting by Lisa Richwine, Patricia Zengerle and Jon Lentz in
Washington, and Lewis Krauskopf in New York. Editing by Chris
Wilson and Cynthia Osterman)