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HHS Secretary Urges States To Rein In Health Rates

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State governors and state insurance commissioners should take active steps to keep health insurers from instituting “excessive rate increases,” according to a top Obama administration official.

U.S. Health and Human Services Secretary Kathleen Sebelius, following up on earlier efforts to ask insurers to explain their rate increases, has written to governors and state insurance commissioners to urge them to use any authority they have to check health rate increase applications carefully.

Sebelius cites a successful move by the California Department of Insurance to discourage WellPoint Inc., Indianapolis (NYSE:WLP), from proceeding with efforts to increase rates for some holders of individual health coverage in California.

“The California Department of Insurance found that the proposed rate increase was based on unreasonably high assumptions about the rate at which medical costs are increasing,” Sebelius writes in the letter. “In light of this recent finding, I urge that, to the extent you have authority to do so, you re-examine any WellPoint rate increases in your state to determine whether any mistaken assumptions similar to those made in California were made in your state.”

The new Affordable Care Act – the legislative package that includes the Patient Protection and Affordable Care Act – provides $250 million in funding to support state health rate review efforts, Sebelius writes.

“We intend to issue guidance on applying for that funding in the near future,” Sebelius writes.

In 2014, when the health insurance exchange shopping system takes effect, individuals and small businesses will have an easier time comparing the prices and features of health coverage products, Sebelius writes.

“In the meantime, however, individual and small business insurance purchasers have little or no bargaining power and limited access to meaningful comparative price information,” Sebelius writes. “That’s why state assistance is so necessary.”

America’s Health Insurance Plans, Washington, says it hopes to see policymakers focus more on the fundamentals.

“An isolated actuarial error in a single state should not distract attention from the biggest challenge facing our health care system: Soaring prices for medical services,” an AHIP representative says in a statement.


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