by bartleby the scrivener | Ha ha ha! So much for the industry's much-touted "collaboration." When will our Dems ever learn, eh? If you lie down with dogs, you get up with rabies. "[T]he 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." (WaPo) Yep, and here's the big announcement. Apparently Congressional Dems didn't see that one coming. I wonder why not? As Josh Marshall says: this is news?
Angered by the insurance industry's late-in-coming cost estimate, a spokesman for Senate Finance Committee Chairman Max Baucus, D-Mont, questioned the credibility of the numbers.
"It's a health insurance company hatchet job, plain and simple," said the spokesman, Scott Mulhauser. (Huffington Post)
The administration too is up in arms.
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.
"Those guys specialize in tax shelters," said Nancy-Ann DeParle, director of the White House Office of Health Reform. "Clearly this is not their area of expertise."...
The frontal assault, though not unexpected, was an illustration of the challenges that lie ahead as the president attempts to deliver the sort of health-care overhaul that has eluded his predecessors for decades. 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....
"The report makes clear that several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system," Karen Ignagni, AHIP's president and chief executive, wrote to board members Sunday. "Between 2010 and 2019 the cumulative increases in the cost of a typical family policy under this reform proposal will be approximately $20,700 more than it would be under the current system." (WaPo)
Right. I am so sure that the industry's "rent-a-research" contains only the most objective and disinterested conclusions.
DeParle and [Finance Committee Spokesman Scott ] Mulhauser said the study overlooks key elements of the bill, such as a $25 billion reinsurance fund to buffer the industry from heavy losses and a provision that allows consumers to keep the insurance they have with limits on premiums increases.
Last week, the nonpartisan Congressional Budget Office released a preliminary estimate that the legislation would reduce the federal deficit by $81 billion by 2019 and would probably extend coverage to 29 million Americans who currently lack insurance. That would leave about 25 million people in the country without coverage.
Enrolling millions of people in a new insurance marketplace known as an exchange, tightening regulations on insurers and providing tax credits to millions of Americans should all lower costs, DeParle said. Contrary to the insurance industry's projections, she said, she expects growth in insurance rates to be slower than anticipated if reform is enacted. (WaPo)
Nate Silver provides a little context for the announcement.
Take a look at what's happened to the share prices of the six largest publicly-traded health insurance companies since Labor Day, which was about the point at which the Democrats appeared to regain their footing -- at least up to a point -- on health care....
Weighted for market capitalization, these insurance stocks have lost 11 percent of their value since Labor Day, wiping out about $10 billion in value. And that's understating the case since the major indices have gained 5-8 percent over the same period -- the insurance industry stocks are underperforming the market by just shy of 20 percent.
So, they're not happy campers, and have begun to launch a belated but well-timed attack on the Democrats' plans.
Jonathan Cohn runs a cold eye over the methodology.
The 26-page paper, which you can read here, examines how four key elements of health reform will affect private premiums. The four elements are the absence of a strong individual mandate, the excise tax on high-cost insurance plans, the chain reaction effect of Medicare cuts, and taxes on various sectors in the health care industry.
But this accounting leaves out some pretty big things, starting with the subsidies that would help people buy insurance. The report itself makes that clear, right up front on page E-6:
The overall impact of these provisions will be to increase the cost of private health insurance coverage for individuals, families, and businesses. The net impact of these increases on households would include the impact of these increases and the new subsidies provided under the bill.
Now, the subsidies are not available to everybody, since they phase out with income and are only available through the insurance exchanges. As a result, people with higher incomes really would face higher premiums--if, again, the rest of the report is right. But there's more fishiness here, most clearly in the section about the excise tax on high-value insurance plans.
As you may recall, the idea of the excise tax is to end the tax subsidy for more expensive plans. The hope is that, once this subsidy is gone, employers and their employees will react by shopping around for cheaper plans--and that the resulting cost pressure will reduce health care spending overall, leading to lower prices down the line. Most economists seem to think this will be the case. So does the Congressional Budget Office, as best as I can tell. (They don't make pronouncements on how reform will affect private premiums, but they do believe it will lower health care spending overall.)
PriceWaterhouseCoopers acknowledges all of this. But they decide that, for the sake of illustration, they're going to pretend that the tax will have no effect except to raise prices.
Ezra Klein flat-out accuses the report of deceptiveness, setting out what you'll have to admit is sort of case for so concluding.
In the hallowed tradition of the tobacco and energy industries, the health insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek to reform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has something of a history with this sort of thing: In the early-'90s, the tobacco industry commissioned PWC to estimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by the Arthur Andersen Economic Consulting group, which concluded that "the cumulative effect of PW’s methods … is to produce patently unreliable results." It's perhaps no surprise that the patently unreliable results were all in the tobacco industry's favor. He who pays the piper names the tune, and all that...
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....
Or take the assumption of "full cost-shifting of cuts to public programs." What that means, essentially, is that health-care spending is considered a constant, and every dollar that a public program cuts from its payments to hospitals is a dollar the private health-care industry has to add to its reimbursements to hospitals. Have you ever heard of that before, in any industry? If Blockbuster decides to cut costs to consumers by negotiating lower payments to movie studios, does Netflix send out a sorrowful e-mail explaining that it will have to increase its membership fee because it now needs to make higher payments to movie studios?
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.
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