Could rate hikes backfire on health insurers?

A new study by Kaiser Family Foundation is providing some evidence to back up horror stories about rising health care insurance costs, revealing insurance companies have tried to raise individual plan costs by 20% in the past year. The publicity, combined with fear of actions by state and federal officials, puts even more pressure on insurers and could help ease the increases.

That pressure to hold down rates is already strong. President Obama met with health insurers on Tuesday to talk about rates and changes as the administration moves forward with implementing the health care overhaul.

"Some insurance companies tried to raise rates even before we passed the law though some of them were making record profits," the president said in announcing the Patient's Bill of Rights to take effect in September.Kaiser's study examined how health care insurance costs have changed for people who have no access to group health insurance and have to buy plans for themselves and their families. It was based on a national survey of 1,038 people conducted from March 19 through April 2. Some are self-employed or own a small business. Others either work at jobs that don't offer health care, are unemployed and lost coverage when jobs ended, or are retired and don't yet qualify for Medicare. Kaiser estimates that amounted to 14 million non elderly Americans in 2008, versus 157 million people covered by employer-sponsored health insurance. Since those figures were pre-recession, Kaiser presumes many more people have had to put themselves and their families on individual plans.

There have been reports of up to 20% annual increases in health plan costs in each of the past several years for consumers who bought their own plan or were able to get small group coverage.

The Kaiser study confirmed part of that. Some of the consumers surveyed didn't accept the increase and switched to less expensive policies offering less coverage and higher deductibles.

The White House quickly noted the study.

Consumer groups are citing the raises in urging the state and federal government to quickly unsheathe two new weapons to control health care costs. Part of the health care overhaul legislation, one requires insurers to spend the bulk of their money on claims and the other lets state officials decide which insurance companies qualify for state health care exchanges. They say health care insurers who make excessive rate increases could find themselves out of state exchanges and possibly having to refund money to policy holders.

"We hope the combination of the tools in the law and signal from the president, would discourage insurers from acting," said Kathleen Stoll, director of health policy and deputy director of Families USA.

She said her group is highlighting the risk to insurance companies of raising rates too aggressively.

"The provisions in the health care reform bill and President Obama's statements should put insurance companies on alert," she said.

Health Care for America Now, a group that is pushing the health care reform, in another report this week complained that health insurers are falsely blaming the new health care law for rate hikes, when if fact they are raising rates to boost profits.

America's Health Insurance Plans, the association of health insurance plans, did not return several calls seeking comment.
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