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Insurer Push on Obamacare Premiums Tops Burwell Challenge

By Alex Wayne
April 12, 2014 12:00 AM EDT 105 Comments
Sylvia Mathews Burwell, currently the director of the Office of Management and Budget, right, is U.S. President Barack Obama's choice to be his next secretary of Health and Human Services.
Photographer: Pete Marovich/Bloomberg
Sylvia Mathews Burwell, currently the director of the Office of Management and Budget, right, is U.S. President Barack Obama's choice to be his next secretary of Health and Human Services.

The first challenge Sylvia Mathews Burwell may face as the nation’s top health official could come from the insurance industry.

WellPoint Inc. (WLP), the biggest commercial insurer in the health law’s exchanges, said last month it may seek “double-digit plus” premium increases for 2015. While many other insurers have declined to comment on next year’s rates, large price increases may chase people away in Year 2 of Obamacare, giving foes impetus to push changes.

Republicans say Burwell will be asked during confirmation hearings to answer questions that her predecessor as health and human services secretary, Kathleen Sebelius, avoided. That includes whether the ratio of healthy, young people to older Obamacare enrollees will cause insurers to raise prices next year. HHS may be reviewing proposed rates for 2015 plans, due in June, during the leadership transition

“Timing isn’t the best here,” said Robert Laszewski, an industry consultant in Alexandria, Virginia. “She could turn Obamacare around come Nov. 15, but it’s got to be done now.”

President Barack Obama said yesterday that Burwell, head of the Office of Management and Budget, would succeed Sebelius, a former Kansas governor, in the HHS job. If confirmed, Burwell will head an agency that topped enrollment goals for the first year of the Patient Protection and Affordable Care Act even as it struggled to fine-tune the program.

Industry Pressures

Insurers “want it to become conventional wisdom that rates are going to go up substantially,” said Jay Angoff, a Washington-based lawyer who previously worked at HHS and was the state insurance commissioner in Missouri. Burwell should publicly rebut that idea, according to Angoff.

“By no means should people assume rates will go up, much less go up substantially,” Angoff said by telephone.

Clare Krusing, a spokeswoman for America’s Health Insurance Plans, the industry’s Washington-based lobby group, said insurers want to develop health plans that include cost-saving payment arrangements with doctors and hospitals, more flexible benefit designs that closely coordinate care for patients to improve value.

“Premiums are going to reflect the underlying cost of care, which continues to increase, and the risk profile of new consumers in the marketplace,” Krusing said. “The debate needs to focus on how to keep coverage affordable.”

Actuarial Memorandum

Angoff said one move Burwell could take to keep premiums as low as possible would be to make insurers’ proposals public. Under Sebelius, he said, the government kept secret -- at the insurers’ request -- a key document called the actuarial memorandum that is used to justify rates.

The memos are “the guts of the filing,” said Angoff, a partner at Mehri & Skalet in Washington. “It is so much to consumers’ advantage, to a buyer’s advantage, and to regulators’ advantage for the public to see what assumptions the insurer makes.”

The filings contain “sensitive proprietary information” that the agency believes should remain private, said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services that oversees the health exchanges.

“We are examining ways to make more information available to the public once a process is in place to protect this proprietary information,” Albright said in an e-mail.

Laszewski said Burwell and the administration should scale back requirements that plans offer a relatively generous benefits package. “If they loosened up the regulations, they could make these health plan offerings far more attractive to consumers than they are today,” he said.

Largest Bureaucracy

While the Patient Protection and Affordable Care Act of 2010 is Burwell’s top priority, her job also includes management of one of the largest bureaucracies in the U.S. government. The health department has major operations based in cities from Baltimore to Atlanta, almost a $1 trillion budget this year, and about 75,000 employees.

The programs under the department’s umbrella are wide ranging and consequential.

Medicare and Medicaid are the largest purchasers of health-care services in the nation. The Food and Drug Administration regulates about a quarter of the U.S. economy. The National Institutes of Health is the largest supporter of biomedical research in the world, while the Centers for Disease Control and Prevention is the nation’s primary defense against plagues and other public health threats.

The sheer scope of the agency alone is daunting, much less having to deal with a politically-sensitive health-care law at a time when mid-term elections are nearing.

‘New Discoveries’

“For weeks there are new discoveries of things that are included in the department’s mandate,” said Michael Leavitt, the health secretary under President George W. Bush, in a telephone interview. “It’s a big and complex department with an organization that is not traditional.”

Inevitably, there will be surprises.

Sebelius, for example, created a controversy in 2011 when she overruled a decision by the FDA to authorize over-the-counter sales of morning-after birth control pills to teenage girls.

Standing as the top priority for any health secretary in the foreseeable future, though, is the Affordable Care Act known as Obamacare. Sebelius resigned after her department overcame what Angoff called the “cartoonishly bad” rollout of new health insurance exchanges in October and November.

7.5 Million

For two months, customers seeking coverage couldn’t log onto government websites, found themselves stalled while trying to sign up, or saw their information inexplicably vanish. Despite the technical flaws, about 7.5 million people had enrolled in exchange plans by April 10, Sebelius said at a congressional hearing before her resignation was announced.

“Under Kathleen’s leadership, her team at HHS turned the corner, got it fixed, got the job done, and the final score speaks for itself,” Obama said yesterday at the White House as he formally announced Burwell’s nomination. Obama said Sebelius told him in early March that she would resign when the first enrollment period concluded on March 31.

Burwell’s confirmation hearings may be relatively quick, if she clears background checks by the Senate Finance Committee that include an examination of tax returns and other financial disclosures. They probably won’t be quiet.

Republican Opposition

Republican senators opposed to the health-care law are “bound and determined to make as much hay out of the confirmation process as they can as they try to put the program in the worst possible light,” said Jim Manley, a former aide to Senate Majority Leader Harry Reid, a Nevada Democrat.

U.S. Senator Mitch McConnell, a Republican from Kentucky and the Senate Minority Leader, said Burwell’s nomination should be “the start of a candid conversation about Obamacare’s short-comings and the need to protect Medicare for today’s seniors, their children and their grandchildren.”

Once confirmed, Burwell must then introduce herself to state officials, health insurers, hospitals, advocacy groups and others doing business with her department, a constituency where she is little known.

States and insurers “are at the top of the list,” said Joel Ario, a former HHS official who is now a consultant at Manatt Health Solutions. As a former governor and insurance commissioner before she took over at HHS, “Secretary Sebelius had good relationships and contacts with both,” he said.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Andrew Pollack

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