Obama Asks Insurance Companies To Justify High Rates

President Obama on Tuesday warned the health insurance industry not to use the recent health care reform legislation as an excuse to raise premiums. He said this after meeting with the CEOs of major medical insurance companies at the White House.

Recognizing that the industry has genuine cost drivers, he told the CEOs that any substantial raise in the premium would have to be sufficiently justified.

The new legislation has a slew of consumer protection provisions which might be unfavorable for the industry. For example, insurance companies have been debarred from withdrawing coverage from sick consumers who inadvertently made mistakes on their applications. Further, most plans cannot exclude children having preexisting ailments. Similarly, most plans have been debarred from imposing annual money limits on benefits.

While most contentious parts of the legislation will take effect only in 2014, these provisions and some others will be effective immediately. Justifying the reforms, Obama introduced many audience members who had to suffer due to dollar limits on their insurance plans.

Rate increase by the industry in the recent times has amounted to as high as 20 percent for individuals, according to a survey by the Kaiser Family Foundation. From 2011, the secretary of health and human services will begin reviewing the rate increases with states. Companies whose rates would be found unreasonably high will be required to justify reasons on their web sites. States will be authorized to restrict them from selling their policies on the exchanges.

Meanwhile, speaking on behalf of the industry, America’s Health Insurance Plans president Karen Ignagni refuted the allegations that premiums were rising due to industry greed. Recessionary pressures and increasing health care costs were driving the rates, she said, while elaborating that with younger and healthier people dropping out due to economic problems, companies tend to be left with more risky pool of older and sick consumers.

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