Health plans asked to explain how they set rates

Washington -- A Senate committee has asked health insurance companies to provide it with detailed policy and pricing data in the wake of reports that small businesses will face significant premium rate increases in 2010, before proposed health system reforms go into effect.

Senate Health, Education, Labor and Pensions Committee Chair Tom Harkin (D, Iowa) sent letters on Nov. 3 to four large insurers -- Humana, UnitedHealth Group, WellPoint and Aetna -- announcing an investigation into their pricing practices in the small group market.

"For a small business's premiums to skyrocket, all it takes is one diagnosis for one employee, or the spouse of an employee," said Harkin, who asked for responses by Nov. 17. "Health insurance companies should open their books and explain to the American people why they support a health insurance market for small businesses that is so dysfunctional and so lacking in transparency."

Harkin's announcement came the same day that Sen. Jay Rockefeller (D, W.Va.) sent a letter to Cigna accusing the insurer of failing to account accurately for as much as $5 billion in health insurance it sold in the commercial group market in 2008. Rockefeller claims insurers also spend a lower percentage of premium dollars on patient care in the individual and small group markets than in the large group market.

"Health insurance companies claim to be good corporate citizens," Rockefeller said. "If this is true, then they need to tell us how they are spending their customers' money. Are they spending it to make people well when they are sick and keep them healthy? Or is the money they charge going to profits, to executive salaries and to figuring out how to deny care to people when they really need it?"

The health insurance industry has been under increased pressure from Democratic lawmakers this year. In October, Senate Finance Committee Chair Max Baucus (D, Mont.) accused Humana of engaging in misleading marketing activities by telling seniors they would lose their Medicare Advantage benefits if health system reform were to pass.

In response to the latest probes, America's Health Insurance Plans spokesman Robert Zirkelbach noted that health plans in every state must justify any increases in premiums with actuarial data. "If the goal is to make health care coverage more affordable for small businesses, policymakers need to address the underlying cost of medical care, which is the key driver of rising health care costs."