WASHINGTON — President Barack Obama's proposed new health care plan would give the federal government the power to punish health insurance companies that spend "too much" on advertising or salaries by ordering them to give rebates to customers.
“If your insurance company spends too much of your premium dollars on overhead, such as big salaries, administrative costs and marketing, they will be required to give you a rebate,” the White House website said Monday in an explanation of Obama’s new proposed health care overhaul.
The proposed power to take money away from insurance companies and return it to customers was part of the plan to rein in soaring health insurance rates.
The White House has seized on reports that some insurers are unveiling double digit rate increases. Anthem Blue Cross, for example, said recently it would raise some individual rates as much as 39 percent.
In response, one of Obama’s proposals would require insurance companies to disclose what percentage of health insurance premiums went to overhead costs such as salaries and advertising.
The government then would have the power to order some portion of that rebated to customers, though the proposal did not specify how much spent on overhead would be “too much” or how big a salary would have to be to trigger a rebate.
Obama based much of his proposal on a Senate health care plan, which included requirement that insurance companies spend between 80 percent and 85 percent of the money from premiums on health care. The Senate said for-profit insurance companies now spend about 74 cents of ever premium dollar on health care claims.
The White House also proposes creating a new government office with the power to veto rate increases.
“There will also be a new rate-review authority that will help keep premiums down and hold insurance companies accountable, so that health insurers will think twice before trying to impose a 39-percent increase on consumers as almost happened in California this February,” the White House said.
The rate authority would be created immediately, White House aides said.
White House Press Secretary Robert Gibbs said the rate authority would only be needed until government-created exchanges fostered new competition among insurance companies and brought down rates. “It is our strong belief is that it would be redundant authority after which we get health care reform implemented,” he said.
But White House aides said the rate authority office would be kept after that. “As the exchanges come online,” said one White House aide, “it may take on a different function.”