Insurers rebut criticisms of profits, rates

As the Obama Administration seizes on a proposed 39-percent rate hike by a California insurer earlier this month to rally new support for a health overhaul, that insurer's top executive is preparing to go before Congress, The Associated Press/Los Angeles Times reports. "At the heart of the debate is the question of what should be a fair profit for health insurers. WellPoint CEO Angela Braly will likely be grilled on the issue when she appears at a Congressional hearing Wednesday."

The insurer will likely explain that it "underestimated the premiums it needed to collect in order to pay claims" for its California policy holders last year, resulting in millions of dollars in losses. "On top of that, WellPoint said hospital costs are rising an average of 10 percent a year and pharmaceutical costs are up 13 percent, and that must be factored into pricing. At the same time, the tough economy is forcing more healthy people to drop their individual insurance. That leaves a higher concentration of sick people who generate medical claims in their risk pools. All this leads to premium increases that could average 25 percent" (Murphy, 2/21).

A recent report from Health Care for America Now, a pro-overhaul advocacy group, found that leading insurers increased their profits by an average of 56 percent in 2009, leading to a "banner year," despite the economy, The (Louisville, Ky.) Courier-Journal reports. But, the companies say the report is misleading, in part because last year's increase in profitability was a rebound for a below average 2008. Insurers also cited increased spending on "hospitals, doctor services and prescription drugs, and expensive technology" as the main cause of their rate increases (Howington and Ungar, 2/20).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.