"President Barack Obama told health-insurance executives they should keep a lid on big rate increases, but the executives said some rises were unavoidable because the new health law requires them to offer better benefits.
Mr. Obama met with them the same day he touted new regulations released Tuesday, in line with the law's provisions, that lift limits on insurance coverage and prevent insurers from denying care to consumers.
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In remarks afterward, the president ... said insurers should justify rate increases and shouldn't use the law to drive up rates in an "unreasonable" way, citing a proposed 39% rate increase by WellPoint's California subsidiary.
Insurance company executives, speaking after the meeting, said they couldn't be expected to improve customers' benefit packages as required by the law without charging more.
Ron Williams, chief executive of Aetna, cited the law's rule that insurers allow children to stay on their parents' plan until age 26. That rule "does increase costs, and that cost is going to show up in the premium increases," he said.
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Starting next year, insurers must use at least 85% of premiums to pay for medical care for patients when they are selling to large employers, and 80% when they are selling to individuals and small employers. The remainder of premiums can go to administrative costs and profit.
Ms. Praeger said she was concerned some insurers will pull out of certain markets because they can't meet the requirement. An administration official said Health and Human Services Secretary Kathleen Sebelius indicated the law allows her to modify the regulations on a case-by-case basis if they would disrupt the market.
The new regulations released Tuesday cover four parts of the bill that take effect starting Sept. 23 or later. They prevent insurers from placing lifetime caps on insurance coverage and restrict the value of annual limits to no lower than $750,000 a year, with a gradual increase to $2 million a year by 2012. The law says insurers must accept children with pre-existing health conditions.
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Mr. Obama called the rules a "patients' bill of rights," evoking Congress's failed attempt almost a decade ago to pass legislation ensuring basic medical rights and a fairer insurance appeals process. He criticized Republicans who want to repeal the law, citing four stories of Americans who were harmed by insurers.
"Anybody who favors repeal is welcome to come talk to these people and tell them why we should go back to the status quo prior to us signing this bill," he told an audience that included congressional Democrats and the insurance executives.
QUESTIONS:
1. When the government requires insurance companies to provide additional services how does this affect the company's costs?2. If the insurance company's costs increase but it is not allowed to increase the price charged for its product, what consequences will result?
3. If the services included in an insurance policy, and the price that can be charged for the policy, are decided by someone in government, rather than by competition between insurance companies, do you think this change will benefit or hurt the average person? Defend your answer using economic concepts.
