March 4, 2010 / 8:36 PM / 8 years ago

Health secretary eyes "bright light" on insurers

WASHINGTON (Reuters) - The Obama administration stepped up pressure on health insurance companies on Thursday, calling on some of the top U.S. companies to be more public in explaining “jaw-dropping” rate increases to consumers.

Health Secretary Kathleen Sebelius, following a White House meeting with several top health insurance executives, said she wants insurers to post information about rate increases online along with financial data to back them up.

“This market doesn’t work,” Sebelius said in pressing the case for lawmakers to pass a final healthcare bill. “But in the meantime, we want to shine a bright light.”

“The meeting was really focused on what is happening with the kind of jaw-dropping rate increases that people are seeing, particularly in the individual and small-group market and what are the reasons for it,” she said.

It also added more uncertainty for an industry that has already become Democrats’ top target in their bid to overhaul the nation’s $2.5 trillion healthcare system.

Health insurers saw their shares fall on Thursday by as much as 3.7 percent.

Sebelius called for the meeting with the four CEOs -- Aetna Inc’s Ronald Williams, Cigna Corp’s David Cordani, UnitedHealth Group Inc’s Stephen Hemsley and WellPoint Inc’s Angela Braly -- among others -- amid growing controversy as some customers face steep rate hikes.

The biggest double-digit increases affect mostly customers who buy policies for themselves on the so-called “individual market,” rather than those who get coverage through their employer or government-run programs such as Medicare.

President Barack Obama, who has pledged to move ahead with major reform, stopped by the meeting to give the CEOs letter from an Ohio woman whose rate is set to rise 40 percent.

The House of Representatives and the Senate have passed separate health reform bills that have stalled since Democrats lost their supermajority in January. House Speaker Nancy Pelosi said on Thursday her chamber would pass a bill.


Obama’s plan calls for federal oversight of insurers’ rates along with states, something Aetna’s Williams rejected in an interview with CNBC after the meeting. The bills would also end practices such as denying coverage for pre-existing conditions.

After the meeting, CEOs -- in stark contrast to the harsh tone Democrats and insurers have taken in recent months -- said the meeting was positive.

“I do believe it was a constructive exchange. The atmosphere was not contentious,” UnitedHealth’s Hemsley told Reuters in an interview.

The executives said they made no commitment over whether to post more information online, and Sebelius told reporters she would later send a follow-up letter to the companies.

Insurers have said they must raise rates to cover skyrocketing healthcare costs at a time when more people are dropping coverage amid a sour economy. Higher costs are then spread among a smaller pool of paying customers, they say.

“You really do have to have a balance ... between the rate that is charged and the solvency of the business,” said WellPoint Braly, who has faced the most heat over rate hikes of up to 39 percent with its California Anthem Blue Cross unit.

Not all insurers face the same impact from reform, with Cigna seen as less vulnerable than rivals since its business is less focused on individuals and government programs.

Cigna’s Cordani told Reuters the meeting focused on “the drivers of health care premiums” such as rising hospital and medication costs. He added Cigna is seeking further talks with the administration.

Still, pressure on the industry is unlikely to ease even as lawmakers forged ahead on Thursday for plans for a final vote.

“The administration is really going to put everything on the line for this initiative,” Morningstar analyst Matthew Coffina said. “They’re kind of going for broke at this point.”

The CEOs of Aetna, UnitedHealth, WellPoint and Humana, have been asked to testify at a House panel March 23.

Industry shares recouped some of their loses. The Morgan Stanley Healthcare Payor Index closed down 1.3 percent while the S&P Managed Healthcare Index ended off 2.3 percent, compared with a slight uptick in the overall market.

Additional reporting by Lewis Krauskopf in New York and Jeff Mason, Ross Colvin, Patricia Zengerle and Steve Holland in Washington; editing by Philip Barbara

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