SHOCKING NEWS: Private Health Insurers Say Health Care Reform Will Lower Costs!
Now that really would have been shocking news, wouldn’t it? If only, as they say.
Sad to say — but not shocking to report at all — the actual news is the reverse of what my title says:
After months of collaboration on President Obama‘s attempt to overhaul the nation’s health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.
The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year’s health-care reform drama.
Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.
Administration officials, who spent much of the spring and summer wooing the insurers, questioned the timing and authorship of the report, which was paid for by America’s Health Insurance Plans (AHIP), an industry trade group.
As Ezra Klein reminds us, “He who pays the piper calls the tune.”
Seriously engaging with [the report's] methodology probably gives it more credit than it deserves, making this seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totally ignoring its claims means some of them might live unchallenged. So rather than a full tour through the “analysis,” here are a couple of its more representative moments.
A footnote — how come the good stuff is always in the footnotes? — on page E-2 of the report sort of gives away the game. It reads: “Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes.” That’s written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.
To illustrate how this works, let’s go back to another PWC favorite: tobacco taxes. Imagine Congress slaps a $10 tax on each cigarette purchased in the continental United States. The impact is obvious: People will virtually cease purchasing cigarettes, or the trade will move onto the black market. But a PWC report that “assumes payment of tax” would assume that cigarette purchasing remains unchanged, and smokers fork over $30 bazillion (approximately) in taxes. This would mark the beginning of a heretofore unknown phenomenon: nicotine bankruptcy.
At least, it would in the world of PWC’s report. But it wouldn’t do so in the real world. So too with these assumptions. Economists think that the tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don’t build it into their estimate. On Page 6, they say, “Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed.” That’s a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.
[...]
Another interesting bit comes on Page 2, which identifies “new minimum benefit requirements that may require people to buy coverage that is more expensive than options to which they currently have access” as one of the “root causes” of coming premium increases. In the footnote, the report complains that the Senate Finance plan requires a minimum 65 percent actuarial value (that is to say, 65 percent of what an individual is expected to need), while the Massachusetts plan only requires a 56 percent actuarial value. Other states have no minimum value. Insurers will also be forced to cover preexisting conditions, have an out-of-pocket limit, and end rescissions.It’s true, as the report says, that buying better insurance will cost somewhat more than buying insurance that doesn’t cover anything. The vast majority of the people affected by this will be using subsidies, of course, but put that aside for a moment. This is part of the point of health-care reform: Insurers will no longer have the freedom to offer products that let an individual think his family his protected when the policy will do nothing of the sort. That may raise prices, in much the way that antibiotics cost more than herbal supplements, but it raises prices because it reduces the insurance industry’s ability to sell a deceptive and insufficient product.
Rep. Anthony Weiner (D-NY) points out that the AHIP report unintentionally makes a great argument for a strong public option (via Think Progress):
If you have the health care industry complaining that we’re going to raise costs because of these changes, it is them putting us on notice that we haven’t put enough cost containment in the bill. You know, the health care industry themselves is putting out a whole report saying that. That should be a tell to the Baucus team that you know what, maybe it’s time for them to go back and revisit the public option.
In a strange way, and look, obviously they didn’t mean this, the health insurance lobby today fired the most important salvo in weeks for the public option, because they have said, as clear as day, left to their own devices, according to their own number crunchers, they’re going to raise rates 111%. And that’s why, you know we have a [petition] at CountdownToHealthCare.com where we’re telling people for the moderates in the Senate, the so-called moderates, and for the White House, we need the public option, and the health care industry is making our argument for us.
Exit point: TNR’s Jonathan Chait wonders why those bloggers in their pajamas were able to find the facts to push back against this report’s misleading conclusions, and Ceci Connolly was not:
Obviously, Cohn and Klein are health care policy experts. But this begs the question of why there isn’t more room for policy experts in the newspaper business.
In fact, I can’t figure why a rigged study conducted by a dicredited group on behalf of a self-interested lobby ought to be the lead story in the Post. Clearly, the fact that the insurance lobby is openly fighting is an important story. But the substance of the report does not deserve the benefit of the doubt. Here is how the Post summed up this question:
Though open to dispute, the analysis is certain to raise questions about whether Obama can deliver on his twin promises of extending coverage to millions of uninsured Americans while also curbing skyrocketing health-care costs.
That’s not the standard (or correct) way to cover dubious, self-interested claims by lobbyists.
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22 Responses to “SHOCKING NEWS: Private Health Insurers Say Health Care Reform Will Lower Costs!”
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Well, Kathy, you've given us a cafeteria full of junk thrown at the insurers' report (actually giving truth to one phrase you quoted, admittedly for a different reason, “predictable industry hit job”).
Now, do you have any kind of refutation of it? A real one?
I guess not.
Meanwhile: The Senate panel vote is tomorrow, so enjoy how it goes. Awaiting your remarks then.
Ha! Kathy, when I saw the earlier headline of Jazz's article, what I thought was “Surprise! The Health Insurance Lobby is against Health Reform!”
The Senate panel is actually not too happy about this report, either. Apparently, they were blindsided, and they were the ones the insurance companies had been supposedly working with so cooperatively to come up with a health care reform plan. Looks like the industry folks got scared that meaningful reform might actually pass.
The insurance industry wants to have their cake and eat it too. The Baucus Bill is already an insurance enhancement and enrichment act, forcing millions more to fork over into their coffers. Now they want their contribution to savings (that they promised as their part of the deal) removed under threat of premium increases.
Guess what? They've been raising premiums at roughly double the inflation rate for years. If this doesn't give them the excuse they want for premium increases, they'll find another.
Congress should never have crawled into bed with these folks and their lobbyists in the first place. The “healthcare reform” coming through Conress is a lobbyists 'bill, not a people's bill, and now the insurance industry wants even more…having their cake and eating it too. And we get to pay for the cake.
I think it was said in another post that while Congress has always been in bed with the health industry, it was Obama that invited them into his White House and made them a lovely cash bed.
The insurance industry wants to have their cake and eat it too.
Well of course. Who doesn't? Public-option advocates sing the praises of health care “for peanuts or completely free.”
The gist of Kathy's post still doesn't hold together: insurers claim current plans will raise costs, insurers are self-interested, therefore current plans will lower costs. Full speed ahead!
The arguments against the report seem pretty good, and I read the section of the report (http://www.tnr.com/sites/default/files/PWC%20Re…) related to taxes on Cadillac plans and I have to admit I'm not qualified to know for myself if their methodology holds up. However, it is at least worth pointing out what appears to be the reason why the accounting firm decided to make the assumptions they did. Although the language is vague, it appears to be to counteract another assumption:
“As the threshold is indexed to CPI-U which has generally been lower than medical trend, it is
expected that many plans that currently have premium rates that are beneath the threshold will ultimately
reach it.”
It's unclear to me if they are saying that this assumption was counted in the numbers, or whether they are saying it is not counted, and are offering it as a justification for no counting the counteracting assumption that high-cost plans would not be modified. At worst they are knowingly not considering a significant factor that would affect their numbers. At best they are making a sloppy calculation that one bad assumption cancels out another.
I do think some of the other points in the report are more straight-forward, but since the credibility (and certainly clarity) of the report has been called into question, those points aren't unfortunately aren't likely to get much attention.
In any case, I think most of the left and the right agree that the finance committee bill doesn't do much to control cost. Were we disagree is how to improve the cost controls.
OK insurance will cost more but it wont matter because we will tax “cadillac” plans and everyone will get tax credits to offset. That's the main point on the argument against this horrible distortion the insurance companies have put out right?
Really sounds like people are pissed because they didn't get out there quick enough to give their version first, to “explain” why the price will go up doesn't mean that it will cost more.
This pots could alternatively be titled: SHOCKING NEWS: Lefty hack writers don't like insurance company report!
BTW guys, either Rachel or Keith took this “report” down last night, was out the door so didn't catch it all, but part of the jist was it was bought and paid for “research”, produced by the same company that brought us the dire warnings of the economic consequences of taxing tobacco.
“it was bought and paid for “research”"
So? It was correct just “misleading” in that it didn't factor in tax breaks and other things that Dem's are “sure” will happen. The price tag will go up, this doesn't seem to lower the cost of anything just smear it around.
“The Senate panel is actually not too happy about this report, either.”
Well, they may not like anything interfering with what they see as their perogative, or with “progress” [sic]. But the timing was abrupt, and while we have to filter out all the left-wing noise in the media, it may have backfired, become bad PR for them (perhaps even for the timing, which they likely chose).
At any rate, I see it, no matter what, as a spur to the House lib Dems not to ease with their extremism, which logically they shouldn't have done, anyway, to maintain the best bargaining position before Senate-House conference negotiations. (If the Baucus bill passes, it's encouragement because it's a form of progress; if the Baucus bill fails, it falls even more on the House to pull harder to the left and they'll be resentful at the bill's failure, anyway, so again, it's encouragement. That's how I see it currently.
)
“we will tax 'cadillac' plans”
Aside from the fact that the lib Dems face opposition from the unions to this, not a single lefty has yet to reply (much less successfully) how the Dems cannot avoid being named as hypocrites for wanting to do this (which presents imagery of “leveling” and socialistic Mediocrity for All) at the same time they have routinely wanted or demanded lavish — “Cadillac” — minimum benefit packages, broad collections of various kinds of physical and mental health, dental, etc., benefits, in addition to naive, overly ambitious desires or demands for (and expectations of) routine preventive and maintenance kinds of medicine.
(As I've also noted, the experience with generous minimum benefit packages in many states, which is a large cause of the higher-than-needed costs of much health insurance, already demonstrates the costliness.)
“So?”
Uh…this is almost too obvious to answer. They took one tiny piece of the bill, studiously ignored the rest of it, and wrote an entire paper in order to make the point that the bill is bad. That doesn't strike you as desperately dishonest?
“They took one tiny piece of the bill, studiously ignored the rest of it, and wrote an entire paper in order to make the point that the bill is bad. That doesn't strike you as desperately dishonest?”
I don't agree that is what they did. I don't agree that Price Waterhouse is some hack partisan firm. And you haven't said crap about the figures just that people should ignore them. Ignore the issues and attack the speaker.
It is beyond obvious that insurance prices will have to go up. When you remove pre-existing condition limitations and won't allow companies to charge those who will use the services more than young healthy individuals then of course the price goes up. Big Shock! Everyone knew this it was just “believed” that people will change what they are currently doing.
So because the price will go up people will end up buying cheaper plans. That's the big inconsistency? BS!
The same plan will cost more! Just because the bill may force people to make cheaper choices doesn't invalidate the study and in fact is what people want to know.
“I don't agree that is what they did. “
That's what they said they did. You can read about it on this very blog, on a more recent post.
Kinda like your reply to my comment?
Um, huh? What's the little joke between you and yourself that I'm missing? It must be *quite* clever indeed.
Maybe I wasn't clear. It is not only me (and the Rachel Maddow show) saying that is what Price Waterhouse did. It is what Price Waterhouse said that Price Waterhouse did. Whether you agree or not doesn't really change the fact that the very people who did it do, in fact, agree.
“That's what they said they did”
They said their job was to analyze part of the bill and did so that is not what you said
“They took one tiny piece of the bill, studiously ignored the rest of it, and wrote an entire paper in order to make the point that the bill is bad. That doesn't strike you as desperately dishonest?”
Here was what PWC said and no it is not what you pretend.
“America’s Health Insurance Plans engaged PricewaterhouseCoopers to prepare a report that focused on four components of the Senate Finance Committee proposal:
· Insurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement.
· An excise tax on employer-sponsored high value health plans.
· Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers.
· New taxes on health sector entities.
The analysis concluded that collectively the four provisions would raise premiums for private health insurance coverage. As the report itself acknowledges, other provisions that are part of health reform proposals were not included in the PwC analysis. The report stated on page 1:
“The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated”
And I challenge you again to add any facts to the conversation. Maybe discussing if the price will go up, why or why not, factors that may keep the price down, instead you are name calling and distorting reality.
“the fact that the very people who did it do, in fact, agree.”
That is just not true. You said “these guy's are dishonest see they agree!” but they never said that. They said they were paid to calculate a particular thing and that's what they did. That other factors could affect the situation, That is not what you said or claim.