Harkin Statement at HELP Committee Hearing: “Health Reform and Health Insurance Premiums: Empowering States to Serve Consumers”

“In the decade before the Affordable Care Act was passed, relentlessly increasing health insurance premiums imposed a heavy tax on families and small businesses.  Over those ten years, premiums for family, employer-sponsored coverage more than doubled.  Small businesses simply couldn’t afford it anymore and began dropping coverage. 

“Congress had to act – and we did.  In passing the Affordable Care Act, we enacted reforms to tame this runaway premium growth.  Today’s hearing will explore how those reforms are already protecting consumers.

“It’s basic economics that one of the surest ways to bring down prices is through open and tough competition.  For the first time in our history, health reform applies this basic principle to the insurance market.  In 2014, Americans in every State will be able to buy health insurance in a “one stop shop” called an insurance exchange.  Just a couple of weeks ago, the Administration released guidance that gives states great flexibility in designing the exchange to suit the unique needs of their citizens.   

“The exchange will bring transparency and competition to markets which, in many areas of the country, have become stagnant and noncompetitive, with the high prices to show for it.  From 1998 to 2006, just the consolidation of insurance markets alone accounted for overall premium increases of about $34 billion each year – equivalent to a $200 annual rate hike per person. 

“If insurers have to compete on price, rates will come down.  Indeed, the nonpartisan Congressional Budget Office projects that premiums in the small group market will be as much as 2% lower in 2016 – about $350 less per family – in a market where premiums have increased 5% or more annually since 2005.  Employer spending on premiums is estimated to decrease by almost 4 percent, about $20 billion in this year’s dollars.  By 2019, businesses will save approximately $2,000 per family they insure.

“And by 2014, families buying in the individual market could save an estimated $2,300 a year if they buy health insurance in a new Affordable Insurance Exchange.

“Health reform also gives state insurance regulators unprecedented new resources to fight for consumers.   The law allocates $250 million in grants for this purpose, almost $50 million of which has been awarded to 45 states and the District of Columbia.  We are releasing a report today from the Government Accountability Office -- that I requested along with Senator Feinstein– which demonstrates the extraordinary work state regulators have done using these grant funds. 

“States are using these new resources in a myriad of ways, for example…

• Improving their ability to scrutinize proposed premium increases,
• Forcing insurers to justify those increases through greater disclosure,
• And soliciting greater consumer input in the review process. 

“Teresa Miller, Insurance Administrator for the State of Oregon, will tell us how grant funds allowed her to hire additional staff and thus more quickly and thoroughly review insurer rate filings, and to bring consumers more fully into the review process. 

“Putting sentries on guard and making sure they have the necessary tools to do their job – those are the kinds of investments the Affordable Care Act makes.

“Finally, health reform’s Medical Loss Ratio provision is a powerful deterrent against confiscatory premium increases, requiring insurers to provide fair value in return for consumers’ premiums.  Specifically, the law requires insurers to return to consumers 80 cents of each premium dollar in the individual and small group markets, and 85 cents on the dollar in the large group market.  If insurers fail to return these amounts to consumers – either as payments for health care services or investments in quality of care – the company has to make up the difference, in cash.

“It’s estimated that, next year, when rebates are due, five million Americans will receive between roughly $160 and $300 per person.  Even those who don’t receive rebates will benefit, since insurers will have controlled premiums to stay above the threshold.

“These provisions are already making a difference.

• Last September, in Senator Burr’s state of North Carolina, Blue Cross Blue Shield announced that, thanks to the Affordable Care Act, 215,000 customers will receive refunds totaling more than $155 million;
• In Senator Blumenthal’s state of Connecticut, more than 15,000 Aetna customers will see rate cuts this year because the insurance company is trying to meet the Medical Loss Ratio threshold; and the state insurance commissioner recently denied an outrageous 35% rate increase proposal;
• And, as Ms. Miller will tell us, she recently denied Regence Blue Cross Blue Shield’s request for a 22 percent rate increase in Oregon’s individual market.

“Some have argued that insurers can’t meet these requirements -- that holding them accountable would cripple their businesses.  Well, insurers have been reporting their quarterly earnings over the last few days, and let me tell you, these are numbers that would make Bill Gates blush.  

“For the second quarter of this year, UnitedHealth Group’s earnings before taxes were $1.9 billion.  Almost $2 billion in one quarter.  And its net profit for that quarter was more than $1.2 billion.  Its executives issued this announcement, and I quote:  “In the first half of 2011, the number of people UnitedHealth Care serves with medical benefits grew by 1.2 million, on top of nearly 1 million people added over the course of 2010.  This 6-quarter addition of 2.2 million more people, almost entirely through organic means, places this among the strongest growth periods for our company.”  I think we can all agree that UnitedHealth will be able to muddle through, somehow. 

“I’ll close with a letter I recently received from an Iowa constituent, who just received notification of a 19% rate increase by United Healthcare.  She writes, “I am a self-employed professional with no pre-existing conditions. I now will pay $ 276.00 per month with a $ 5000 deductible. I changed from a $ 2500 deductible last year when the premiums were just getting too costly…At least this hasn't been a repeat of 2008, when my premium was increased twice that year. That was a 48% premium increase that year.

“These reforms are long overdue, and I’m glad our witnesses have agreed to discuss them.  I want to thank them for coming to Washington today, and look forward to their testimony.”