Senate committee to investigate health insurer pricing of small business coverage

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Senate committee to investigate insurer pricing

The Senate health care committee chairman said Tuesday the panel is investigating how health insurers price the coverage they sell to small businesses, which have struggled for years with soaring premiums.

Sen. Tom Harkin, D-Iowa, has sent letters to several big health insurers, including UnitedHealth Group Inc., WellPoint Inc. and Aetna Inc., asking for information on how they set rates and premiums for policies covering groups of 50 people or fewer.

The senator, who announced the inquiry at Tuesday’s hearing, also requested information on individual compensation that exceeds $5 million annually, according to a statement from his office.

Democrats and the insurance industry have been in an all-out struggle over the health care overhaul sought by President Barack Obama. Democrats have pushed for stripping the insurers of their decades-old exemption from federal antitrust laws.

In August, Rep. Henry Waxman, D-Calif., announced an investigation similar to Harkin’s. He sent letters to six insurers requesting details about their plans for small businesses and how coverage decisions are made. Waxman chairs the House Energy and Commerce Committee.

The Senate letters note that a survey of state insurance commissioners found small businesses face average rate increases of 11 percent to 16 percent for 2010.

But some business leaders told a Senate Health, Education, Labor and Pension Committee hearing Tuesday that they’re dealing with even larger price hikes.

Walt Rowen, owner of Susquehanna Glass Co. in Columbia, Pa., said he saw an initial quote for coverage that involved a 128 percent cost increase. He eventually found a policy that cost 43 percent more.

Rowen said before Tuesday’s hearing that he has probably changed insurance carriers eight times in the past 10 years to get better rates. He also has introduced high-deductible plans to reduce premiums.

“This year it’s just absolutely astronomical … it’s ridiculous,” said Rowen, whose company provides coverage for about 24 employees.

Health insurance premiums track directly with the cost of medical care, said Robert Zirkelbach, a spokesman for the insurance industry trade group America’s Health Insurance Plans.

“If the key issue here is how to make health care coverage more affordable for small businesses, then we need to address the underlying cost of medical care,” he said.

Zirkelbach also noted that insurers are required to show that their premium increases for small businesses are justified, and many states limit or restrict the variation in small business premiums.

Associated Press writer David A. Lieb in Jefferson City, Mo., contributed to this report.

(This version CORRECTS the name of the group Harkin chairs, which is the Senate health care committee.)