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On Monday, insurers that sell Medicare Advantage plans must submit their 2011 bids to the government. In a letter to four insurance-industry executives, Health and Human Services Secretary Kathleen Sebelius warned the companies not to increase premiums and co-payments for seniors. "Focus on price and quality rather than asking seniors who need health care the most to pay more for it," Ms. Sebelius wrote in a letter sent Friday and reviewed by The Wall Street Journal. The letters went to WellPoint Inc., Cigna Corp., BlueCross BlueShield Association and Health Care Service Corp., according to a person familiar with the situation. Those executives met with Ms. Sebelius last month.
Many insurance companies are planning to increase costs for a range of services for seniors next year, according to consultants who have helped prepare their bids. Dozens of Medicare Advantage providers plan to cut back vision, dental and prescription benefits. Some plans are eliminating free teeth cleanings and gym memberships, and raising fees for hearing aides, eye glasses and emergency-room visits.
Consultants cite two reasons for the cuts. The rate the government will pay private insurers to run the plans is frozen for 2011 at 2010 levels, while medical costs are expected to increase an average of at least 6%. Such price increases and benefit cuts will help them recoup that difference, the consultants say.
Meanwhile, the health overhaul will impose drastic payment cuts to insurers that run the plans, and consultants say insurance companies need to begin adapting now. Starting in 2012, the law calls for a gradual reduction in government payments to insurers, totaling $136 billion before the end of the decade.
The Obama administration and Senate Democrats say that passing those costs on as early as next year is unfair. In her letter, Ms. Sebelius warned insurers that she will deny insurers bids if they include excessive price increases, using new powers under the health law.
The Obama Administration's Genius New Plan For Keeping Health Insurance Premiums Down - Hit & Run : Reason Magazine