The Obama administration ratcheted up pressure on health insurers on Thursday, saying some firms planned double-digit rate increases while earning billions in profits and paying their bosses multimillion dollar salaries.
In a report issued by the Department of Health and Human services, the administration said These massive increases are disturbing examples of the problems that make reforming our health insurance system more important than ever.
The report came as President Barack Obama tries to revive his stalled healthcare reform plans and two weeks after Health Secretary Kathleen Sebelius sent a letter to Anthem Blue Shield of California demanding information about the firm's plan to boost premiums by up to 39 percent.
Healthcare spending in the United States is about $2.3 trillion annually, or about 16 percent of the U.S. economy. Despite the high spending levels, some 30 million U.S. citizens are uninsured and do not have access to routine healthcare.
Employers complain the cost of providing healthcare insurance for their workers is affecting their ability to compete against firms from other countries.
Work on healthcare reform, Obama's top domestic priority, ground to a halt in the Democratic-controlled Congress last month after the president's party lost control of a Senate seat, giving rival Republicans the ability to used procedural hurdles to block legislation.
The House of Representatives and the Senate passed different versions of healthcare reform and were attempting to reconcile the bills when Democrats lost control of the Massachusetts Senate seat previously held by Edward Kennedy, who died last year.
The Los Angeles Times reported in early February that Anthem Blue Cross, a WellPoint unit, planned to increase individual market premiums for its health insurance by up to 39 percent in the coming month. After Sebelius challenged the decision, the firm delayed the move for two months.
BIG INCREASE NOT UNIQUE
This shocking increase isn't unique. Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue, said the report, which Sebelius will release at a news conference on Thursday.
The report cited several firms as having planned big premium hikes in recent years. Anthem sought them in several different Northeastern states, the report said. Blue Cross/Blue Shield of Michigan wanted a 56 percent hike for plans sold on the individual market, it said.
UnitedHealth, Tufts and Blue Cross asked for 13- to 16-percent increases in Rhode Island, and some plans in the individual market in Washington increased premiums by 40 percent until the state imposed stiffer regulations, the report said.
Leading experts have predicted that without reform, these increases will continue, and the federal government and most states don't have the legal authority to block or reduce health insurance rate increases, the report said.
Profits for the 10 largest insurance companies rose 250 percent from 2000 to 2009, 10 times faster than inflation, the report said. The top five health insurance firms -- WellPoint, UnitedHealth Group, Cigna, Aetna and Humana -- took combined profits of $12.2 billion, up 56 percent from 2008, it said.
The chief executives of the top five received $24 million on average in 2008, it said.
Administrative costs at insurance companies grew faster than the amount spent on prescription drugs over the past decade, the report said, a trend expected to continue. Three of the top five insurers cut the proportion of premiums they spent on customers' medical care last year, committing more to salaries, administrative expenses and profits, it said.
The report said a lack of competition among insurers was partly to blame for the rapidly escalating costs. Nearly all U.S. insurance markets are highly concentrated and without competition, insurers have no reason to drive down costs.