GetHealthHelp

The New York Times

December 3, 2009

Editorial

Good News on Premiums

The health insurance industry frightened Americans — and gave Republicans a shrill talking point — when it declared in October that proposed reform legislation would drive up insurance costs for virtually everyone by as much as thousands of dollars a year. The nonpartisan Congressional Budget Office persuasively contradicted that claim this week.

Undaunted, the industry issued a rebuttal report, claiming again that premiums would soar. We find this second industry report no more persuasive than the first.

The insurance industry is not giving up. On Thursday, the Blue Cross and Blue Shield Association issued a report contending that the C.B.O. underestimated the expected medical costs of people who will be buying policies on the individual (nongroup) market.

(CBO notes that) the legal mandate to obtain coverage, the penalties for noncompliance, and the generous subsidies for low- and middle-income people would encourage most people to enroll without waiting to become sick.

And…

The White House

The White House Blog

December 3, 2009

Coming Attractions: Insurance Industry Funded Study is Wrong on the Facts… Again…

Posted by Dan Pfeiffer, White House Communications Director

Later today, the insurance industry releases their latest in a string of flawed analyses designed to confuse the debate around health reform.

In addition to ignoring Congress’s independent budget experts, the new report reaches its conclusions by cherry-picking which policies to analyze – a tactic we’ve seen the industry use repeatedly. Most egregiously, its alarmist headline conclusions leave out the impact that new tax credits will have on the cost of health insurance for families. That makes no sense.  In reality, the report itself acknowledges that: “[s]ubsidies will entirely or partially offset these premium increases for some individuals.”

And…

BlueCross BlueShield Association

Oliver Wyman

December 3, 2009

Impact of the Patient Protection and Affordable Care Act on Costs in the Individual and Small-Employer Health Insurance Markets

By Jason Grau and Kurt Giesa

Impact of Subsidies

Subsidies would play an important role in reducing out-of-pocket costs for certain individuals, especially those below 200% of FPL, who are likely to purchase insurance under the proposed reforms. Subsidies will cover more than 90% of premium costs for individuals in this income range, significantly reducing financial barriers to purchasing coverage.

By contrast, our analysis of the Senate bill projects that 8.7 million will not be eligible for the subsidies. Another 3.3 million people who purchase coverage will have incomes of 300-400% FPL and will be eligible for average subsidies of 45% of their premiums (which would not fully offset the cost increases we predict). Finally, 13.3 million lower-income individuals who purchase coverage will have incomes of 100-300% FPL. They will have access to subsidies of 70-90% of their premiums, which will offset much if not all of the increased premiums they will face.

Our modeling predicts that those who are eligible for subsidies will be more likely to purchase insurance than those who are not. However, subsidies will not ensure that young and healthy people participate. Short of achieving 100% coverage, adverse selection will always exist, and the young and healthy will be the most difficult to bring into the market.

Impact of Weak Individual Mandates

The Senate bill requires individuals to purchase insurance coverage or face financial penalties. An amendment accepted during mark-up of the Chairman’s Mark in the Finance Committee, and largely retained in the Senate leadership bill, substantially weakened the bill’s individual mandate. The individual mandate penalty in PPACA is set at just $95 in the first year insurance reforms become effective (2014). This penalty rises gradually, reaching a maximum of $750 per adult in 2016. This maximum penalty is likely to be only about 16 percent of an average premium in 2016, assuming current rates of medical cost inflation.

The amendment also exempts individuals whose premiums exceed 8% of their adjusted gross income (AGI). In 33 states, the average cost of health insurance exceeds eight percent of median state income. In fact, in the first year of reform 25% of the exchange-eligible population will face insurance costs in excess of the 8% AGI threshold and qualify for mandate exemption. Premium increases over a ten-year period will result in nearly half of the population qualifying for mandate exemption status.

Conclusion (excerpt)

The provision of subsidies alone will not offset the impact of insurance reforms on average premiums in the market. A balanced, sustainable insurance pool, that ensures everyone is covered, is critical to making healthcare affordable for all.

Full report:

Comment From Don McCanne:  Recent reports from the insurance industry, including this report from the BlueCross BlueShield Association, have been targeted by proponents of the current leading reform model as biased reports without credibility – witness the comments by The White House and The New York Times (both also biased). But the fundamental message from the insurance industry is very valid: the reform proposal before Congress does not do nearly enough to control health care costs, and the mandates, subsidies and penalties are inadequate to ensure that all risks are adequately pooled.

This report confirms once again that the subsidies are inadequate, particularly for middle-income families, and likely will result in adverse selection as the healthier take their chances on remaining uninsured. It confirms that the penalty for being uninsured is too small to ensure compliance with the insurance requirement. It also confirms that a very large and rapidly growing number of individuals will be exempt from the mandate to purchase insurance simply because their incomes are inadequate to be able to afford the plans.

There is one statement in this report that the proponents of the proposal before Congress should take careful note of, and it is remarkable that it is coming from the insurance industry: "A balanced, sustainable insurance pool, that ensures everyone is covered, is critical to making health care affordable for all."

The dysfunctional, fragmented model of health care financing that Congress is moving forward with can never create a balanced, sustainable risk pool, nor can it ensure that everyone is covered, nor can it make health care affordable for all.

We really do need a balanced, sustainable pool that includes everyone and is equitably financed: an improved Medicare for all.