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Health Reform Advocates Target Insurance Rate Hikes

February 15, 2010 at 12:00 AM EST
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Anthem Blue Cross Blue Shield announced they will delay premium hikes for consumers in California's individual insurance market, but reform advocates hope the backlash over the proposed 39 percent rate hike will push Congress to take action? Betty Ann Bowser reports.
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JUDY WOODRUFF: Now: new questions about rising premiums, amid big profits for health insurance companies.

“NewsHour” health correspondent Betty Ann Bowser has that.

The Health Unit is a partnership with the Robert Wood Johnson Foundation.

BETTY ANN BOWSER: The recent announcement by Anthem Blue Cross and Blue Shield that it would raise premiums as much as 39 percent for policyholders in the individual market in California has created a storm of controversy at the state and national levels.

So, in what appeared to be bowing to pressure, over the weekend, the company said it would delay the increase two months. But, timing aside, Health and Human Services Secretary Kathleen Sebelius calls the increase unreasonable.

KATHLEEN SEBELIUS, U.S. Health and Human Services scretary: Well, I think it’s hard to look at a company which had a $2.7 billion profit in the fourth quarter of 2009, pays both their top CEOs just under $10 million a piece, and says we have to raise rates on 800,000 people, which will effectively, Betty Ann, either drive them out of the marketplace, or make them make terrible choices about, do I have health care or pay my rent? Do I buy my kids new gym shoes or provide them health insurance?

And that’s a situation nobody in America should be in.

BETTY ANN BOWSER: Anthem’s announced increase sparked congressional hearings scheduled to take place on February 24. And, in California, both the state’s insurance commissioner and the state’s assembly have launched investigations.

Self-employed San Francisco attorney Pamela Fasick says that means her monthly premiums will soar from $584 to $748.

PAMELA FASICK, San Francisco attorney: That is a very large increase in a monthly expense on very short notice. And I really don’t have — I really don’t have that kind of extra disposable income.

BETTY ANN BOWSER: Brian Sassi, the president of Consumer Business for WellPoint, the parent company of Anthem, said the rate increase “represents approximately 10 percent of our more than eight million members in California.”

Sassi added that rates are rising because healthy people are choosing not to buy coverage during the recession, leaving a sicker and older pool of customers.

And, Robert Zirkelbach, spokesman for America’s Health Insurance Plans, says profit margins for health insurance are slimmer than in other areas of health care.

ROBERT ZIRKELBACH, spokesman, America’s Health Insurance Plans: The profits in the health insurance industry are much less than other industries within the health care sector, and have been historically low, compared to many other industries.

The average profit margin if you — well, if you look at — Yahoo! does their latest quarterly rankings, showing that the average profit margin in the entire health care sector right now is 11 percent. But the health insurance industry is at 3.4 percent, eighth on the list.

BETTY ANN BOWSER: Anthem’s decision to postpone the increase will give investigators two months to see whether the company is in compliance with federal and state regulations.

Meanwhile, one of the nation’s leading health care advocacy groups says the five largest insurance companies last year posted record profits, while covering nearly three million fewer customers.

Secretary Sebelius says that shows more and more Americans are being driven out of the individual market.

KATHLEEN SEBELIUS: Everybody else is down. Health costs keep going up. And I think insurance companies, over and over again, are declaring record profits. So, it isn’t that more people are getting better coverage. It isn’t that we have better health results. It’s that more of these companies are making big profits and eliminating the affordability of health insurance for way too many American families and businesses.

BETTY ANN BOWSER: Sebelius says the Anthem increase is a graphic illustration of why the Congress needs to pass health care reform, something President Obama has also been hammering away at lately.

U.S. PRESIDENT BARACK OBAMA: If we don’t act, this is just a preview of coming attractions. Premiums will continue to rise for folks with insurance. Millions more will lose their coverage altogether. Our deficits will continue to grow larger.

BETTY ANN BOWSER: Zirkelbach says, the president’s rhetoric is just politics as usual.

ROBERT ZIRKELBACH: The fact is, we need an open and transparent discussion about what is driving the rise in health care costs in this country. We’re — if you look at the data that the federal government has put out, it shows very clearly that it’s underlying medical costs, not health plan administrative costs and profits, that driving the increase in health care costs.

And, yet, up to this point in the health care reform debate, there has not been a willingness and the desire by people in Washington to really focus on and address the underlying medical cost drivers.

BETTY ANN BOWSER: Much of this is expected to be addressed next week at the White House, when the president meets with members of both parties in a special summit on health care.