Federal Legislative Update

April 28, 2010

The Senate Health, Education, Labor, and Pensions Committee held a hearing on April 20 to examine issues surrounding health insurance premiums and congressional interest in further regulating premiums. America’s Health Insurance Plans (AHIP) was included among the witnesses at this hearing.

Senator Dianne Feinstein (D-CA) testified in support of her legislation, S. 3078, which would create a new Health Insurance Rate Authority and require the Department of Health and Human Services (HHS) Secretary to establish, in conjunction with the states, a uniform process for the review of “potentially unreasonable increases” in health insurance premiums. A second panel of witnesses consisted of: Phyllis Menke, an Iowa consumer; Illinois insurance commissioner Michael McRaith; Grace-Marie Turner from the Galen Institute; and Karen Ignagni who testified on behalf of AHIP.

In her comments before the committee, Ignagni emphasized that AHIP’s members – Blue Cross and Blue Shield of Texas being one of them – are working hard to implement the provisions of the new health reform law. She expressed concern that the law does not do enough to address the exploding costs of health care, while noting that rising premiums are a symptom, not a cause of the problem. Ignagni pointed to government data showing that the costs associated with health insurance account for four percent of national health expenditures, and emphasized that plan profit margins – at 2.2 percent in 2008 and 3.2 percent in 2009, according to Fortune magazine – are well below those of other health care sectors.

Ignagni testified that federal and state data show that premium increases are being driven by the underlying cost of medical services and increased utilization of services. She also discussed the situation in Massachusetts, expressing concern that state regulators are imposing arbitrary caps on premiums without any linkage to the factors that are driving premium increases, as outlined in the recent report by the Massachusetts Attorney General. Ignagni pointed out that the new federal law establishes extensive regulations for every aspect of health plan operations, including minimum loss ratio (MLR) requirements that cap administrative costs and plan profits, a process for the annual review of “unreasonable” increases in premiums, a requirement for plans to publicly justify premiums, and grants to ensure that the states have sufficient resources to implement these requirements.

Nomination of CMS Administrator / HHS Appointments

The Obama Administration announced on April 19 that the President has nominated Dr. Donald Berwick to serve as administrator of the Centers for Medicare & Medicaid Services (CMS). Berwick currently serves as President and CEO of the Institute for Healthcare Improvement and also is a professor at Harvard Medical School and the Harvard School of Public Health.

Three other HHS appointees will play a leadership role in the implementation of health reform legislation: Jay Angoff will oversee regulation of insurance markets, Jeanne Lambrew will oversee coverage expansions and Phyllis Borzi will oversee employer issues.