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Health Plan CEO Breaks From Pack Molina Criticizes Colleagues, Sebelius on Premiums

The head of one of the nation’s largest Medicaid health insurers rebuked both his colleagues and Health and Human Services Secretary Kathleen Sebelius this week over a mounting flap regarding the imposition of large premium increases prior to healthcare exchanges becoming operative in 2014.

“It makes sense that many of these plans will try and reset their rates with 18% annual premium increases now, because it is much likelier that after reform is implemented, they will be getting 3% or 4% increases,” J. Mario Molina, M.D., told the California Conference of the Healthcare Financial Management Associationin a sometimes brutally frank speech in Long Beach on Monday.

Most officials with commercial healthcare plans had denied such a strategy, telling enrollees any rate increases they sought were coupled to the higher cost of delivering healthcare in a post- reform environment. This has also been the position of the influential America’s Health Insurance Plans lobby. Molina, who is chief executive officer of for-profit Long Beach-based Molina Healthcare, sits on the AHIP board of directors.

Earlier this month Sebelius sent a letter to AHIP Executive DirectorKaren Ignagni asking that health plans tone down their rhetoric linking reform to cost increases, or possibly be excluded from the exchanges.

“I found that very disturbing, and a violation of our First Amendment rights,” Molina said. In an interview immediately after the speech, Molina suggested that Sebelius’ threat about the exchanges was an empty one, reflective of Washington’s fractious political environment.

But in Wednesday’s interview, Molina said he believed many insurers that sought rate increases may have damaged their already fragile public images.

He noted that recent rate increases averaging 16% received by Anthem Blue Cross, Health Net and Aetna for individual policyholders in California, although approved by California Insurance Commissioner Steve Poizner and therefore justifiable, were not necessarily prudent.

“In some respects, strategically, and politically, going after the rate increases was a mistake,” he said. “It might be a good idea (from a financial standpoint), but you need to be strategic and think long-term and maybe take a loss for a year.” Molina’s own publicly-traded plan, which covers 1.2 million Medi-Cal and Medicaid enrollees in 10 states, mostly have its rates set based on reimbursements states receive from the federal government.

It’s that difference between the structure of Molina Healthcare and commercial health plans that has enabled Molina to make such statements about his colleagues, according to industry observers.

“Their business model is so different from Blue Cross that Molina can be independent. They’re not restricted,” said Judy Dugan, research director for Consumer Watchdog, a Santa Monica- based consumer advocacy group. An AHIP spokesman did not immediately respond to a request to comment on Molina’s remarks.

Molina made some other pointed remarks to the HFMA audience, including a recollection from 2008 that White House Chief of Staff Rahm Emanuel, while still a member of Congress, had made a profanity-laced presentation to officials from AHIP that the Obama Administration would implement reform without their input. “I hope Emanuel leaves soon to become mayor of Chicago,” Molina said, later adding that “zealots” within the Obama Administration implemented healthcare reform.