White House plans new rules for health insurers

President Barack Obama’s health-care proposal will include new rules for insurance companies and greater oversight
on the industry, Health and Human Services Secretary Kathleen Sebelius said in an interview.

“More oversight, more transparency, and new rules for health insurers are going to be part of health reform,”
Sebelius told Bloomberg Television. She mentioned medical loss ratios, which mandate how much insurers have to spend on health
benefits as opposed to administrative costs.

Obama will release a proposal to restart the health-care debate before a bipartisan White House meeting on Feb. 25. He wants
a final bill to be “comprehensive,” Sebelius said.

The president will offer a single proposal that takes “some of the best ideas” from House and Senate bills as
well as “a number” of Republican ideas, Sebelius said. Obama has challenged Republican leaders to present their
own health-care plan at the meeting. A senior White House official said the plan will be posted by the morning of Feb. 22.
Sebelius said talks on the administration’s proposal are continuing.

Democrats in Congress are reconciling differences between versions of legislation passed last year by the House and Senate
that’s aimed at expanding coverage to millions of uninsured Americans while curbing costs. House Democrats say that
while the two chambers are close to an agreement, they may not have a unified plan in time for the televised meeting.

Sebelius targeted health insurers this week, releasing a report that questioned proposed premium increases by companies such
as Indianapolis-based WellPoint Inc., the biggest U.S. insurer of individuals and small businesses.

“If we don’t pass health reform, we will have people locked out of the market because of pre-existing conditions,
driven out of the market because they simply do not have the extra cash to be able to pay these increases,” she said.

The White House report on Feb. 18 highlighted 2009 premium increases that she said “are five to 10 times larger than
the growth rate in national health expenditures.” It also focused on 2009 profits and executive pay at U.S. insurers.

The report follows her inquiry into WellPoint’s proposed 39-percent premium rise for Californians who buy their own
insurance. WellPoint has been called to testify before Congress about the increase on Feb. 24.

Sebelius said health legislation would require of insurers “transparency on what amount of money that they’re
collecting—are they really paying on health claims.” She said it would force them to show how much money is going
for executive compensation, advertising and overhead costs.

She said during a news conference earlier this week that insurance company profits are “way over anybody’s estimates.”
She said the five largest U.S. insurers took in combined profits of $12.2 billion in 2009, 56 percent higher than in 2008.

Insurers said they are being scapegoated. “It’s time to stop the politics of vilification,” Karen Ignagni,
president of America’s Health Insurance Plans, said in a statement.

Ignagni attributed rising costs in the individual market to “the urgent need to reduce the growth of underlying medical
costs and to bring everyone into the system.”

WellPoint executives said unexpectedly high costs made the California premium increase necessary. “Premiums were insufficient
to cover the higher costs,” Brian Sassi, head of WellPoint’s consumer business unit, said in a Feb. 18 interview.

Bradley Fluegel, the company’s chief strategy officer, said the increase wasn’t making up for money lost in 2009.

“We’ve already lost that money,” he said. “We just have to reflect on a go-forward basis the higher
costs.”

Both the House and Senate bills would place new limits on insurers, barring them from rejecting clients because of a pre-existing
condition. They would also require all Americans to get insurance or pay a penalty, offering government aid and creating online
exchanges where individuals and small businesses could shop for insurance.

A compromise bill was set to pass both chambers when Democrats lost a special Senate election in Massachusetts that cost
them the 60th seat they needed to overcome Republican efforts to block passage. Faced with the impasse, Obama invited Republicans
to sit down with Democrats at the Feb. 25 meeting to discuss ways forward.

Mike Steel, a spokesman for House Republican Leader John Boehner of Ohio, said if Democrats want bipartisan cooperation they
must understand it “means a clean sheet of paper, not an infomercial for another Democratic backroom deal.”

Should the Democrats be unable to gain any Republican support, one avenue open to them is using a budget process known as
reconciliation that would require only a simple majority of 51 votes in the Senate. Still, that would force them to slim down
the bill because it must be limited to spending and tax issues.

Another alternative is for the House to try to pass the bill the Senate approved on Christmas Eve along with a reconciliation
measure that would include some of the provisions favored by the House such as more generous subsidies to help people buy
insurance and greater aid to the elderly in purchasing medication.