Health Summit 2010
Health and Human Services Secretary Kathleen Sebelius on insurance rates at White House health summit
Thursday, February 25, 2010; 1:44 PM
So, Kathleen, why don't you just address some of the issues related to insurance reform? There's some agreement here, but I know that on the Republican side, there are a couple of concerns about that issue of rate review, the issue of setting up some benchmark standards that insurance companies have to abide by. Some people may think that those have been a little bit too aggressive.
You've been both a governor as well as an insurance commissioner. Maybe you can talk a little bit about -- about what you've seen at all those different levels and how you think we can best move forward to protect American families.
SEBELIUS: Well, thank you, Mr. President. And I know there are lots of people who want to comment on these topics, but I don't think there's any question and I think there's a lot of agreement that the current insurance market really fails way too many people.
It is a system that is not a market for about 40 million Americans who are either in an individual policy or in a small group policy, have no choice. There is no competition.
According to the American Medical Association in their study yesterday, 99 percent of the market in metropolitan areas, 75 percent of the markets across the country are very concentrated -- which means they're monopolies, they're not markets. So we've got a trap.
And I think the rules allow people to be locked out from the front end if you've got preexisting conditions, allow people to be thrown out with a stop on benefits during the course of a treatment, or when your policy expires and you're supposed to renew, you're dumped out of the market, or to be priced out, which is going on across this country.
There's been a highlight of a couple of rates, but double-digit rates across the country on top of double-digit rates on top of double-digit rates, and people have no choices.
So the common areas, I think, of agreement -- high-risk pools. There are lots of states across the country running high-risk pools. As an insurance commissioner, we ran the high-risk pool in Kansas. It is a strategy that's been in place for almost 30 years in many states; 200,000 people total in the entire United States are in high-risk pools. Because they're so expensive that they really don't offer anything -- because when you put all the sick people together and you say, "OK, you get to buy a policy and you get no help with that policy," it is a death spiral.
You will always have the highest costs and, on top of that, the highest costs, and you've got the sickest people who are already paying the highest costs for treatment.
They don't work very well. They are a stop-gap measure that the House and Senate have proposed to get people from here to a new market.
I think what -- what -- the exchanges have a lot in similarity with the health plans that have been talked about by the House and Senate. There's a big difference. And it's not a Washington difference; it's a state difference. The state insurance commissioners across this country have unanimously opposed health plans for decades. And they feel that it takes people -- it isn't the pooling that's objectionable. It's the fact that there is no consumer protection, that there is no ability to apply common-sense rules. And we had the drive-by deliveries in Kansas, where people were being kicked out of the hospital 18 hours after having a baby to save money, only to be remitted with jaundice and to be readmitted with dehydration. It's not a particularly good idea.
So getting rid of preexisting conditions, getting rid of caps on yearly benefits and long-time benefits, allowing kids to stay on plans are ideas that have been accepted by both.
Setting up a new marketplace. Giving small business owners and individuals choice and competition in the private sector, but making the private sector operate on a different set of rules, including having some loss-benefit analysis. How many of those dollars -- you heard Senator Coburn eloquently talk about the 30 cents of every dollar that goes to pay for expenses other than medical costs. A loss benefit analysis, a medical ratio would do just that.
How many of your dollars are you actually spending on provider care, on prescriptions, on treatments, and how much is going to overhead and CEO salaries and advertising, to try to get a handle on rates. Having some rate review. Having some transparency and some opportunity to have people make choices and make companies compete with one another and not separate the marketplace.
I think the most dangerous part of the system right now is having people -- having insurance companies pick and choose who gets coverage and who doesn't, based on your health condition. It's a lot cheaper to insure people who promise never to get sick. I watched it as insurance commissioner.
But segregating that market is not insurance. It's not pooling a risk.
And I think your proposal, Mr. President, gets back to the fact that there would be a pool. There would be an opportunity to pool that risk and have the people have the kind of negotiating powers a governor -- and, like Senator Alexander, I am a former governor. We both ran our state employee health pools, I don't know about Tennessee, but in Kansas, that was the largest pool in the state, 90,000 covered lives. We had a lot of negotiating power. We could get a pretty good deal on a couple of companies competing on hospital rates, on doctor rates.
That's what this kind of pooling mechanism and the new exchange would -- would give everybody, and it's around a set of standards that made sense.