[Congressional Record (Bound Edition), Volume 156 (2010), Part 8]
[Senate]
[Pages 11184-11186]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  HEALTH INSURANCE RATE AUTHORITY ACT

  Mrs. FEINSTEIN. Mr. President, tomorrow the President of the United 
States will address the Nation on the 90-day anniversary of the passage 
of health care reform, so I have come to the floor at this time to 
discuss an omission from the health care bill, and that omission is the 
protection of consumers from unfair medical insurance premium rate 
increases, which, as I will show in the next 15 minutes, are now taking 
place virtually all over this Nation.
  On March 4, I introduced legislation to provide the Secretary of 
Health and Human Services with the ability to set up a rate review 
procedure to provide that insurance premium rate increases are 
reasonable. Senators Boxer, Burris, Casey, Gillibrand, Lautenberg, 
Mikulski, Reed, Sanders, and Whitehouse have all cosponsored this bill. 
I originally proposed the amendment during the health care reform 
debate. We worked with the Administration in putting it together. We 
worked with the Finance Committee. We worked with Representative 
Schakowsky in the House, who has introduced the same legislation. 
President Obama decided to include it in his health care reform 
proposal, but unfortunately it did not meet the criteria for 
reconciliation and therefore had to be dropped. On March 4, I 
introduced a bill to provide this rate review, and on April 20 Senator 
Harkin was good enough to hold a full hearing in the HELP Committee.
  The time has come to take action. The time has come to protect 
consumers from the egregious abuse of insurance companies that are, in 
fact, taking place across this very Nation today.
  Health insurance premiums have been spiraling upwards at out-of-
control rates--10, 20, 30 percent per year--all while big national 
insurance companies enjoy increasing profits.
  Everyone by now is familiar with the increases that Anthem Blue 
Cross, a subsidiary of WellPoint, was set to impose--as much as 39 
percent--for 800,000 Californians in the individual market. It turns 
out that Anthem Blue Cross used flawed data to calculate these health 
insurance premium increases for hundreds of thousands of California 
policyholders, resulting in increases that were larger than necessary. 
The State insurance commissioner ordered an independent actuarial 
study, and here is what they found: They found that the 25-percent 
average increase proposed by Anthem should only have been 15.2 percent.
  What is most disturbing is that Anthem's case is not an aberration. 
Far from it. The five major insurers in the small group market in 
California--Blue Shield, Kaiser Permanente, Anthem Blue Cross, Aetna, 
and United Health Care--have just announced rate increases for small 
businesses that will average 12 to 23 percent. Some will be hit with 
rate increases as much as 76 percent. That likely means people will 
lose their insurance. This means that over 1.6 million Californians 
will shortly see increases in premiums. These premium increases have 
been going on all along. As a matter of fact, literally hundreds of 
thousands of Californians

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have had to lose their insurance because they can't pay these premium 
increases.
  This is not a problem unique to California. The White House reports 
that premium rates have been rising across the Nation with substantial 
geographic variation. For employer-sponsored family coverage, premiums 
have increased 88 percent in Michigan over the past decade compared 
with a 145-percent increase in Alaska.
  A recent report by the Center for American Progress Action Fund found 
that WellPoint is pursuing double-digit increases in the individual 
market for 10 other States in addition to California: Colorado, 
Connecticut, Georgia, Indiana, Maine, Nevada, New Hampshire, New York, 
Virginia, and Wisconsin.
  Here are a few examples of those rate increases in the individual 
market. Average rates in Colorado will increase by 19.9 percent. Some 
consumers will see increases as high as 24.5 percent. In Maine, Anthem 
Blue Cross Blue Shield requested a 23-percent increase in 2010. They 
then sued the State's insurance commissioner for rejecting an 18.5-
percent increase last year on top of it. But in April a Maine court 
upheld the insurance commissioner's decision. In Indiana, rates are 
expected to increase 21 percent in 2010.
  Other insurance companies are also raising rates. Health Care Service 
Corporation of New Mexico proposed 24.6 percent increases for about 
40,000 individual policies last fall. The school district in Weston, 
CT, is served by CIGNA, which proposed a 23-percent increase in the 
district's insurance premiums for the 2010-2011 fiscal year.
  In a recent Kaiser Family Foundation survey, 77 percent of people 
purchasing insurance in the individual market report being asked for 
premium increases. That is over three-fourths. These increases are 
averaging 20 percent. We don't know the extent of the problem 
nationwide, but the reporting requirements in the health reform law 
will improve the information available. However, right now, until 
changes go into effect, there is a glaring loophole which allows for 
private for-profit medical insurance companies--the big ones--to 
increase rates as much as they possibly want to and possibly can.
  The recently signed health care bill does require insurance companies 
to provide justification for unreasonable premium increases to the 
Secretary of Health and Human Services. They must also post these 
justifications on their Web sites. This provides transparency, granted, 
but it leaves the loophole. Simply stated, the Secretary has no 
authority to do anything about these rate increases. So an insurance 
company can argue the large increase is justified, but in some States 
there is no review to see that it is. In other States, officials may 
not have the authority to block an increase that is not justified. We 
need to close this loophole.
  The bill we have introduced will do just that. This legislation gives 
the Secretary of Health and Human Services the authority to block 
premium or other rate increases that are unreasonable. In some States, 
insurance commissioners already have that authority, and that is fine. 
The bill doesn't touch them. In Maine, for example, the State 
superintendent of insurance was able to block Anthem's proposed 18.5-
percent increase last year. She approved only a 10.9-percent increase.
  In 23 States, including my own--California--companies are not 
required to receive approval for rate increases before they take 
effect.
  So this legislation we have introduced simply creates a Federal 
fallback, allowing the Secretary to conduct reviews of potentially 
unreasonable rates in States where the insurance commissioner does 
not--and I repeat, does not--already have the authority or the 
capability to do so. That is in 23 States.
  The Secretary would review potentially unreasonable premium increases 
and take corrective action. This could include blocking an increase, 
providing rebates to consumers, or adjusting an increase.
  Under this proposal, the Secretary would work with the National 
Association of Insurance Commissioners to implement the rate review 
process. She would identify States that have the authority and 
capability to review rates. States already doing this work will 
continue to do so unabated and unfettered. The legislation would not 
affect them. However, for the consumers in the other 23 States with no 
authority, such as California, protection from unfair rate hikes would 
be provided.
  This proposal would also create a Rate Authority, a seven-member 
advisory body to assist the Secretary with these responsibilities. A 
wide range of interests would be represented, including consumers, the 
insurance industry, medical practitioners, and other experts.
  I think this proposal strikes the right balance. There is no need for 
involvement in States with insurance commissioners that are able to 
protect consumers. So the legislation I have introduced simply provides 
Federal protection for consumers who are currently at the mercy of 
large health insurance companies whose top priority is their bottom 
line.
  We, in fact, are the only industrialized country in the world that 
relies heavily on a for-profit medical insurance industry to provide 
basic health care. As T.R. Reid says in his book ``The Healing of 
America'': No country with a large for-profit medical insurance 
industry has been able to really reform health care costs.
  So what we have in America today are multiple large, for-profit 
insurance companies. They are public companies. They are focused on 
profits. They are heavily concentrated. They leave consumers with few 
alternatives when their premiums increase. They have merged over the 
years and they have gained market concentration in a way that no other 
business or industry is allowed to do in the United States because they 
have an antitrust exemption. Major League Baseball has that exemption. 
The health insurance industry is one of only a few industries with this 
exemption.
  The Judiciary Committee has passed out legislation which would remove 
that antitrust exemption, and that legislation should be passed as soon 
as possible. In 2007, just two carriers--WellPoint and United Health 
Group--gained control of 35 percent of the national market for 
commercial health insurance. That is because they have merged and 
acquired using that antitrust exemption.
  According to a study by the American Medical Association, more than 
94 percent of American health insurance markets have a highly 
concentrated market share. This means these companies could raise 
premiums or reduce benefits with little fear that consumers will end 
their contracts or move to a more competitive carrier because they have 
bought up the more competitive carriers.
  In my State of California, just two companies--WellPoint and Kaiser 
Permanente--control more than 58 percent of the market. In Los Angeles, 
these two carriers controlled 62 percent of the market in 2008. Before 
health care reform, these companies had little incentive to be 
efficient with the premium dollars they collected. These large 
insurance companies have large and substantial profit margins while 
continuing to raise premiums for consumers.
  According to Health Care for America Now!, four of the five largest 
health insurance companies--WellPoint, United Health, Humana, CIGNA--
saw profits increase 56 percent from 2008 to 2009; that is, from $7.7 
billion to $12.1 billion. Only Aetna saw their profits decrease.
  In the first 3 months of 2010, the five largest for-profit medical 
health insurance companies--WellPoint Inc., United Health Group, Inc., 
Aetna Inc., Humana Inc., and CIGNA Corp.--recorded a combined net 
income of $3.2 billion. That is in the first 3 months of this year.
  Here is the significance: That is a 31-percent jump over the first 3 
months of 2009. So just in the first 3 months of this year, through 
premium increases they now have a $3.2 billion or 31-percent increase 
in profits.
  Here are the company profits for the first quarter of 2010:

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  WellPoint, $876.8 million; that is a 51-percent increase over the 
same quarter in 2009. Humana, $258.8 million; that is a 26-percent 
increase in the first quarter 2010 over first quarter 2009. Aetna, a 
$562.6 million profit; that is a 29-percent increase for the first 
quarter 2010 over first quarter 2009. UnitedHealth, $1.19 billion; that 
is a 21-percent increase first quarter 2010 over first quarter of 2009. 
Cigna, $283 million; that is a 36-percent increase first quarter over 
first quarter of last year.
  See, this is amazing. They receive these huge profit margins, then 
they turn around and raise premiums on consumers, many of whom are 
struggling to keep their insurance because they have lost their jobs, 
and many of whom have had a double-digit increase last year and even 
the year before.
  In 2009, despite the worst economic downturn since the Great 
Depression, these insurers set a full-year profit record. This caps a 
decade of enormous profit growth in the industry. Between 2000 and 
2007, profits at 10 of the largest publicly traded health insurance 
companies soared 428 percent--from $2.4 billion in 2000 to $12.9 
billion in 2007.
  The rapidly increasing insurance premiums are a piece of a larger 
problem. Multiple factors, including the large profit sustained by many 
hospitals, now are contributing to the cost of health care in the 
United States. So what we are seeing is an increase in costs charged by 
major hospitals.
  But it is important to note that while the cost of medical care is 
increasing, premiums are rising much faster than the cost of medical 
inflation. I must say, there are predictions that we will build into 
our budget deficit a structural deficit, and that structural deficit 
will come from these very rising health care costs. Mr. President, we 
must do something about it.
  From 2000 to 2008, premiums for employer-sponsored health plans 
increased 97 percent for families and 90 percent for individuals. At 
the same time, the payments that private insurers made to health care 
providers increased 72 percent, medical inflation increased 39 percent, 
wages increased 29 percent, and overall inflation increased 21 percent. 
So figure inflation increased 21 percent, wages 29, medical inflation 
39, and payments to health care providers increased 72 percent, yet 
insurance premiums increased 97 percent. Much more than the increase in 
medical costs. That is the problem. If we let it happen, we have no one 
to blame but ourselves.
  Meanwhile, consumers struggle to afford these continued rate hikes. 
Between December 31, 2008, and March 31, 2010, the combined commercial 
enrollment of these five companies fell by 2.8 million Americans. So 
insurers make increasing profits by increasing rates and, at the same 
time, they push 2.8 million Americans off of medical insurance because 
of those increasing rates. This is very real. It is happening out there 
every day, every week, every month. We must do something about it.
  Let me give you one personal story. Laurel Kaufer is a 48-year-old 
single mother of two sons. She lives in Woodland Hills in my State. She 
is a self-employed mediator and lawyer. She has had Blue Cross for 25 
years. Her son, Brandon, is 21 and he attends the University of 
Arizona. Her son, Zack, is 19 and goes to USC.
  Anthem Blue Cross has raised her health insurance rates 550 percent 
over the last 10 years. Between February of 2001 and March of 2010, Ms. 
Kaufer has spent $52,128 on health insurance premiums alone. That 
doesn't include deductibles.
  She has no choice but to pay the increases. With her two sons in 
college, she doesn't have any disposable income. She seeks medical 
treatment only when she has to. She and her son do their annual 
checkups, but as Ms. Kaufer says:

       Sometimes I don't get a test that a doctor says I should 
     have, because it costs me money, and I wait it out to see if 
     I can do without it.

  This is a family with insurance, passing up tests because they 
already spend over $52,000 on premiums.
  There are numerous stories like these. Individuals and families have 
to choose whether to buy groceries, pay their mortgage, or purchase 
health insurance.
  As I pointed out, in the last few years, 2.8 million Americans who 
were previously insured by for-profit insurance companies have severed 
their policies or lost their insurance because they can't pay the bill.
  I strongly believe we need to take action on this and soon because it 
is going to continue and it is going to spiral. These companies are 
going to take every advantage of a loophole in the law to raise 
premiums, to be able to increase their profit margin and push more 
people off of insurance.
  This bill is very necessary. Premiums are increasing every day. I 
urge my colleagues to join me in supporting this legislation, the 
Health Insurance Rate Authority of 2010, which will close this 
loophole.

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