US Report: Health Premiums Could Skyrocket

Updated 2:59 p.m. ET

Consumers are facing budget-busting increases in medical insurance premiums, Health and Human Services Secretary Kathleen Sebelius said Thursday, releasing a report the Obama administration hopes will tap public outrage and help revive its stalled health care overhaul.

People buying their own insurance in at least six states have been facing pressure from insurers to raise rates by as much 56 percent, the report said. Officials said the problem is likely to be more widespread, but data from individual insurers in different states is difficult to obtain.

"We think it shines a light on the urgency for health reform," Sebelius told reporters.

The Democratic health care bills would lower costs for many consumers by offering government subsidies to most of those buying their own coverage. Premiums would remain high, but insurers would face greater government scrutiny when they try to raise rates.

Proposed premium increases of as much as 39 percent by WellPoint's Anthem Blue Cross in California set off a wave of criticism and forced the company last week to announce a postponement. President Barack Obama seized on Anthem as Exhibit A to make his case for sweeping change before a bipartisan White House health summit next week. California officials said more than 700,000 households face increases averaging 25 percent overall and as high as 39 percent for some.

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In a briefing for reporters, WellPoint executives blamed their rate increases on rising medical costs and a pool of customers that is gradually becoming older and sicker, as younger, healthier people drop coverage. They insisted that their competitors are raising rates in much the same way.

"We understand this is a hardship," said Brian Sassi, president and CEO of WellPoint's consumer-business unit. "This is not something that voluntarily we choose to do."

The HHS report found that the Anthem numbers are in line with increases sought by insurers in other states - at a time of robust profit growth for the companies and a lack of competition in most states.

For example, Anthem in Maine was denied an 18.5 percent increase last year and is now requesting that state regulators approve a 23 percent rise. Maine is home to Sens. Olympia Snowe and Susan Collins, Republican moderates whose support Obama would like to have for his health care legislation.

Michigan's Blue Cross Blue Shield plan requested approval for premium increases of 56 percent in 2009. And in the state of Washington, rates for some individual health plans increased by up to 40 percent until regulators cracked down.

Other states cited in the report were Connecticut, Oregon and Rhode Island.

The premium increases affect the most vulnerable part of the health insurance market, policies marketed individually to customers buying their own plans. According to the Census Bureau, only about 9 percent of Americans purchase coverage directly, while nearly 60 percent are covered under employer plans. Family premiums for those with workplace coverage rose 5 percent last year, even as inflation fell 1 percent, but nowhere near the rates seen in the individual market.

The health care legislation pending in Congress aims mainly to address the insurance problems of individuals and small businesses. While requiring most Americans to carry coverage, it would provide subsidies to make premiums more affordable. It would also create a new kind of insurance supermarket for individuals and small businesses, offering a range of competitive plans comparable to what federal employees have.

Yet it would not be a free ride. A Congressional Budget Office analysis last year found that the Senate Democrats' bill would raise the average premium per person in the individual market by 10 percent to 13 percent, mainly because insurers would have to sell more comprehensive coverage. The government would pick up much of the tab, however. The majority of the people purchasing their own coverage would be eligible for assistance averaging two-thirds of the cost of their premiums.