Sebelius asks payor CEOs to justify premium hikes

Secretary of Health and Human Services (HHS) Kathleen Sebelius has sent a letter to several insurance company CEOs asking them to publicly justify proposed health insurance premium increases.

The recipients include CEOs of UnitedHealth Group, WellPoint, Aetna, Health Care Service and Cigna HealthCare.

“Last Thursday, I asked CEOs to post online the actuarial justification for premium hikes so consumers can see why their premiums are skyrocketing,” said Sebelius. “Now, it’s time for these insurance company CEOs to do their part to make the system more transparent for the American people. If insurance companies are going to raise rates, the least they can do is tell us why.”

The letter comes a week after these executives attended a meeting at the White House to discuss the issue.

Sebelius also requested that CEOs post online the actuarial justification for premium increases. “To that end,” she wrote, “I am reiterating the request I made at our meeting on Thursday: post on your websites the justification for any individual or small group rate increases you have implemented or proposed in 2010, and continue to post such a justification  in connection with any future increases.

Sebelius said the posted information should include:

• Estimates on medical cost and utilization increases, the assumptions driving these estimates, and the basis for those assumptions;

• If premiums increase more than estimated medical costs, a description of what accounts for those differences;

• The number of people who will be receiving premium increases, as well as the number of people who will be receiving different levels of premium increases, further broken down by characteristics including plan type, age and sex;

• Enrollment changes in different plans since the past year;

• The number of people on whose experience the rate increase is calculated;

• Any premium rating variation including rating variation by age and health status;

• An affordability plan explaining what the company is doing to improve the affordability of healthcare, and the estimated financial impact of the company's affordability initiatives;

• An explanation of any cost containment or quality improvement efforts made that affect the increase;

• The expected medical loss ratio resulting from any premium increase; and

• Information on the percentage of premium revenues spent on medical claims, disease management, quality initiatives, administrative costs, profits and executive salaries broken down at least by market type.