The Obama administration’s new health proposal could lead to a dramatic increase in the cost of health care and health coverage, insurers argue.

The Blue Cross and Blue Shield Association, Chicago, and America’s Health Insurance Plans, Washington, today put out statements acknowledging that the high cost of health insurance is a problem.

But “several provisions in the president’s proposal would make coverage even more expensive,” the Blues contend in their statement. “These provisions include putting new taxes on people’s insurance, requiring many people to buy richer benefit packages than they do today, and allowing millions of people to forgo coverage until they are sick – driving up costs for everyone.

AHIP President Karen Ignagni says the Obama administration has focused too much on regulating health insurers and too little on health care providers.

“To suggest that cost containment can be achieved by singling out health plans ignores the very inconvenient truth that premium increases reflect increases in the underlying cost of medical services,” Ignagni says. “Regulating premiums won’t do anything to reduce the soaring costs of medical care. This would be like capping the prices auto makers can charge consumers, but letting the steel, rubber, and technology manufacturers charge the auto makers whatever they want.”

The proposal that President Obama unveiled today would create a new Health Insurance Rate Authority with the authority to reject what HIRA officials believe to be unreasonable rate increase applications. A description of the proposal is available here.

The HIRA proposal “ignores the unique cost drivers in each of the 50 state insurance markets,” the Blues say. “This new agency, which creates a highly politicized federal review process, would divorce premium review from the state regulators’ responsibility of assuring that health plans have enough funds to pay future policyholder claims, potentially leading to multi-plan insolvencies across the country.”

Instead of starting by creating a HIRA, the Blues say, the Obama administration should address drivers of health care costs such as:

- “Cost shifting,” or provider efforts to have private payers make up for losses on providing care for government program participants.

- The high cost of some prescription drugs and some other forms of health care technology.

- Reduced provider competition.

- The aging and generally poor physical condition of much of the U.S. population.

- Lack of care coordination.

- A delivery system that rewards volume rather than quality.

The Blues already support requiring health insurers to offer coverage on a guaranteed issue basis, without basing premiums on health status, but “this only works if these reforms are coupled with an effective requirement for everyone to obtain and maintain coverage,” the Blues argue.

Ignagni notes that health insurers have a relatively low profit margin, and that only 1% of U.S. health care spending goes to health plan profits.

“It is time to ask: What are we doing about the other 99 cents?” Ignagni says.

Officials at the Centers for Medicare and Medicaid Services recently suggested that the two primary drivers of the 2009 health care spending increase were higher medical prices and greater use of medical services, Ignagni says.

Ignagni has given the following as examples of unsustainable health care cost increases:

- A Massachusetts report that found that some Massachusetts hospitals and doctors are paid twice as much as others for providing similar patient care.

- A report that at least 4 prescription drugs cost more than $350,000 for a 1-year supply.

- A report of a Colorado hospital that charged an out-of-network patient $26,000 for gall bladder surgery, even though the Medicare fee for gall bladder surgery is just $681.

Ignagni says some factors responsible for driving up health care costs appear to be:

- Sky-high unit-costs for medical services.

- Lack of transparency about the cost of medical services.

- Payment systems that reward volume rather than value.

- Systemwide administrative costs.

- Inadequate support for prevention and chronic care management.

- Medical malpractice suits.

The National Association of Health Underwriters, Arlington, Va., is backing the insurers.

“The White House plan will exacerbate our nation’s economic crisis by driving up private health insurance costs so significantly that millions of American families and businesses will be priced out of coverage, disrupting the quality coverage on which millions of Americans rely,” NAHU Chief Executive Janet Trautwein says in a statement issued by NAHU.

“The high cost of health care is the primary problem with our current system, and unfortunately the president’s plan does little to truly rein in these costs,” Trautwein says.

Allison Bell contributed information to this report.