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Sebelius: Administration Is Negotiating Rates In Federal Exchanges

By Phil Galewitz

June 24th, 2013, 4:27 PM

Hoping to get consumers the best prices, the Obama administration is negotiating with insurers looking to sell policies in online health insurance marketplaces this fall, Health and Human Services Secretary Kathleen Sebelius said Monday.

“Negotiations are underway and we will be negotiating rates across the country,” Sebelius said at a news briefing.

HHS officials said last year they would not operate the federally-run exchanges using the “active purchaser” model – meaning they would not bar insurers that offered rates they deemed uncompetitive. HHS is operating exchanges in about 35 states starting Oct. 1.

Congress gave federal and state regulators the option to work as “active purchasers,” and California and five other states chose that model.

Consumer advocates prefer an “active purchaser” approach because they believe it will increase competition and lower prices among plans. But the Obama administration opted against that after being lobbied by insurers and business groups who said they prefer the “open market” model because it ensures greater competition.

HHS last year said it would take all insurers that apply to sell policies in the federally run exchanges for at least the first year of open enrollment that runs from October through March.

Negotiating with insurers is a more subtle approach, said a senior health official speaking on background. He said insurers are being told by HHS if their rates are “outliers” as compared to others’. When that occurs, he said, the federal government is asking insurers if they have submitted the correct rates.

“The process is really to make sure the information is accurate and we will be providing plans an opportunity to see what is posted before they become public,” the health official said.

Joel Ario, a fomer Obama administration who is now managing director of consulting firm Manatt Health Solutions, said negotiations between HHS and the carriers could be a win for both consumers and insurers.

“In a marketplace where some insurers know they priced at the high end of their actuarial range, feedback from regulators that allows them to reconsider their pricing might be a welcome opportunity,” he said. 

Sabrina Corlette, project director at the Health Policy Institute at Georgetown University in Washington, pointed out the Obama administration may be limited in such efforts by the fact that many states have only one or two carriers in their individual or small group insurance markets.

“States like Mississippi are struggling to get more than one insurer to participate in the exchange,” she said. But in other states where there are four or five insurers, she said, HHS will have more leverage.

Corlette said HHS officials may also face challenges because they have less knowledge of markets than state insurance officials.

7 Responses to “Sebelius: Administration Is Negotiating Rates In Federal Exchanges”

  1. Fran says:

    Gee, maybe we’ll see dimwit Darrell Issa hold a few of his moronic Congressional witch-hunts, huh? It’s anyways fun to watch his Neanderthal deep-south GOP committee members asking their useless lunatic questions meant to showboat for their far-right whacko extremist gun-toting Cro-Magnon base. Talk about a class of complete Republican nitwits! I can’t wait to see the GOP clown show begin! It’s a gas! Phineas Taylor Barnum had nothing on today’s Republican Party. Absolutely nothing!

  2. E R Winter says:

    The HHS plan to “negotiate” rates is, as is all of Obamacare, fraught with pork and unintended consequences. The “B&I lobby”, by way of singularity and statistics, has the votes, which the “insureds” will not, because of the absence of common interests (diversity of percieved risk/reward ratios). The only thing deeper in Washington than the “next most” is the snow.

  3. John Spek says:

    “HHS officials said last year they would not operate the federally-run exchanges using the “active purchaser” model – meaning they would not bar insurers that offered rates they deemed uncompetitive. ”

    It would be interesting to see what happens when all insurers are deemed noncompetitive.

    Since many areas have only one carrier interested in selling exchanged based coverage, it would not be difficult to end up with ZERO after the first year..

  4. Lena Conway, Group Health Insurance Underwriter says:

    Negotiating with insurers especially big insurers does not mean the federally run exchanges can get more competitive prices. And even if they did, in order to break even, hospitals must up their prices to make up for the bigger discount, if in fact, the Fed actually had enough leverage to negotiate a bigger discount. The hospital services will be a way to make up the loss revenue due to the bigger discount. The Fed must make rules or regulations for how hospital charge and provide cost effective but high quality care, or that hospital will go out of business. Hospitals and insurers are both trying to balance their agreements to come to the same profit margin they want. It’s NOT going to be cheaper just because the Fed feels they represented the 30 million uninsured and have the leverage to negotiate a lower fee. The Fed cannot change how the healthcare and insurance industry do business, and therefore, getting a lower discount meant nothing. Fee base can be increase by the hospital to offset the discount so they all make the profit they want. HHS must look at both sides and implement strategies or regulations to prevent the increased medical cost to be carried by the middle class. That’s what happened and it will happen again. Hospital and insurers are not going to be charitable, unless there something in it for them like bigger tax credits. But that would defeat the purposed to making health insurance and health care affordable. Come on, HHS. You let the lobbyists talked you into a one sided negotiation. HHS must make sure both hospital and insurers make the level of sacrifice to correct the health care cost. If they don’t, tax the hell out of them. Also the penalty from the employers are too low. That’s just going to make the workers lose their benefits from their employers. If the Affordable Care Act failed because in the end, medical cost did not go down, the impact will be huge and the middle class will suffer. There may even be more people becoming uninsured due to unaffordable premium. I thought the administration is not going to allow lobbyists to persuade them to do what’s best for the health care and insurance industry. HHS must keep that promise or the whole thing will fail. Leave a loophole for the industry to get around on lower spending and efficient care will ensure the Affordable Care Act will fail. Remember, the healthcare industry and insurance industry will not compromise their profit margin for the good of the country. They have to have some incentives. What will HHS give them? Loopholes to get around the rules? Or tax incentive and higher employer penalty? As an underwriter and familiar with claim utilization statistics, it’s not so simple just for the Fed to negotiate a better rate, while take no control over the hospital spending side. Besides, a better rate may mean a more restrictive plan benefit features like having limits to major procedures. How is that going to help the rest of us? The take away to make the premium low enough to be affordable will become the middle classes’ burden. Please invite some of our experience underwriters to discuss your strategy. Talking to lobbyists and those who are advocate of the health care industry only gives HHS one side of the information on this equation. HHS must do things to both side of the equation, namely both the insurer and the hospital behaviors, to make this work right. Please, HHS. Talk to those of us who are underwriters who have intimate knowledge of how utilizations changes and what drives it to help you make you final policy.l

  5. Lena Conway, Group Health Insurance Underwriter says:

    Correction ON LINES 9 and 10:
    The Fed cannot change how the healthcare and insurance industry do business, and therefore, getting a BIGGER discount meant nothing. Fee base can be increased by the hospital to offset the discount so they all make the profit they want, or by additional unnecessary procedures

  6. Lena Conway, Group Health Insurance Underwriter says:

    Correction ON LINES 9 and 10:

    It should say: The Fed cannot change how the healthcare and insurance industry do business, and therefore, getting a BIGGER discount meant nothing. Fee base can be increased by the hospital to offset the discount so they all make the profit they want, or by additional unnecessary procedures.

  7. Don Levit says:

    Lena:
    Thanks so much for taking the time to express your thoughts and concerns.
    I have a question for you (and others):
    If HHS or each State Exchange was able to negotiate a single rate for every procedure, so that each insurer would pay the provider the same amount per service performed, would this help or hurt competition?
    Would it raise or lower prices?
    Don Levit

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