The Wonk Room

Insurers Complain That House Bill Lets Them Charge Older People Just Twice As Much As Younger People

Yesterday, America’s Health Insurance Plans (AHIP) — the health insurance lobby — held a press conference focusing on “the need for major change, and for keeping costs in check.” AHIP President and CEO Karen Ignagni warned that “the bill the House passed could thrust too much of the cost of health care onto the shoulders of younger people because it lets insurers charge older people – who typically incur much higher medical bills and whose incomes are generally higher – just twice as much as younger people.”

The lobby has long argued that if insurers can’t set premiums for older adults “as much as 5 times as high as those for younger adults for identical coverage,” then they would have to shift costs to younger applicants. Coverage would become “unaffordable,” “resulting in a smaller and less stable pool, and higher premiums for everyone.”

But a recent report from the Urban Institute disputes these claims. The report, which models premiums under 5:1, 2:1, and 1:1 age bands, concludes that “overall, there is almost no difference across the premium rating options in the share of the total population that would be left uninsured.” Similarly, the various age bands would be very little effect “on aggregate health spending of government, employers, and household.”

However, the report concluded that the insurers’ preferred rating of 5:1 would “significantly alter health care financing burdens for the youngest and oldest adults and families” who don’t qualify for government subsidies (for those who do qualify, the difference would be absorbed by the subsidy.) As the chart below demonstrates, “the affordability concerns are substantially more pronounced” for older single adults (55-64yo) under the 5:1 rating than for younger single adults (18-24yo) under the 2:1 rating”:

A 5:1 rating would significantly burden 55-64 year olds purchasing non-group coverage and actually increase subsidy costs. An earlier version of the Senate Finance Committee bill adopted the industry’s 5:1 recommendation, but changed the rating during mark-up. The insurers, however, insist on the 5:1, noting that the government could provide seniors with an “external” subsidy outside of the exchange to help them afford coverage.

Generally, the industry is concerned that a tighter age band would jeopardize the industry’s ability to attract a significant number of young people into high deductible policies outside of the exchange (in the remaining individual market). A 4:1 or 2:1 community rating would force insurers to charge younger people higher premiums and would presumably attract fewer enrollees; a 5:1 community rating would allow insurers to charge older people more and market more “affordable” (read: high deductible) policies to young and healthy applicants who pay more in premiums than they file in claims.

As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”

Top Insurance Lobbyist: Health Care Legislation Has ‘No Cost Containment’ »

This afternoon, the House Republican Health Caucus hosted “a Policy Forum exploring the options for making health coverage affordable for individuals with pre-existing conditions.” At the event, Karen Ignagni — the President and CEO of America’s Health Insurance Plans (AHIP)– asserted that the health care bills before Congress contain “no cost containment” provisions:

First, we’re looking at pieces of legislation with no cost containment. There is no bending the curve, as Doug [Holtz-Eakin] indicated, in these pieces of legislation. I have a hunch that members of Congress, as they’re thinking about constructing proposals, are going to come back to that curve bending discussion, as you indicated in your opening remarks and I think that’s going to be very important.

Watch it:

Ignagni — who recently released a now discredited report claiming that health reform would increase premiums — went on to criticize the Senate Finance Committee’s weak individual mandate requirements and the excise tax levied on high-cost health care plans.

Ignagni is right to argue that Congress should strengthen the individual mandate requirement, but her central claim is demonstratively false. In fact, many economists believe that the very policy measures she opposes would bend the cost curve downward.

As Christina Romer explained this morning during a speech at the Center for American Progress, the excise tax on high cost plans “will discourage insurance companies from offering high-priced plans that would otherwise eat up larger and larger shares of workers’ wages. A policy such as this is probably the number one item that health economists across the ideological spectrum believe is likely to stem the explosion of health care costs.”

Secondly, the Senate Finance Committee’s bill (along with the House legislation) goes a long way towards “reining in costs” and controlling spending (over the long term and the short term). It restructures payments to Medicare Advantage plans (to base payments on plan bids with bonus payments), establishes an independent Medicare Commission to submit proposals for reducing excess Medicare cost growth by targeted amounts, reduces Medicare DSH payments by an amount proportional to the percentage point decrease in the uninsured, reduces payments for preventable hospital readmissions in Medicare, and establishes a hospital value-based purchasing program in Medicare to pay hospitals based on performance on quality measures. The House and Senate Finance bills also invest in critical delivery system reforms.

Ignagni is dismissing cost containment policies that undermine insurer profits and pretending that the industry is not at least partly responsible for the trend in spending. But just because she refuses to see them, doesn’t’ mean they don’t exist.

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Is PricewaterhouseCoopers Backpedaling From Its Own Insurance Industry Report?

Over the weekend, America’s Health Insurance Plans (AHIP)– the lobbying arm of the health insurance industry — issued an inflammatory report warning Congress that the Baucus health care bill would increase health care costs. But critics have argued that the report is a skewed analysis that doesn’t consider the totality of reform.

As the Senate Finance Committee points out, the industry backed analysis “has not taken many of the reform provisions into consideration in reaching its numbers.” “These other reform provisions would have the opposite effect and lead to lower premiums – but those provisions were ignored,” the Committee wrote in a memo criticizing the report.

The text of the actual report legitimizes this criticism. From page 8:

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.

Last night, PricewaterhouseCoopers — the firm hired to perform the analysis — issued a statement reiterating the report’s limitations. PricewaterhouseCoopers reprinted the report’s page 8 language, leading POLITICO’s Chris Frates to interpret the statement as “Hey, we weren’t paid to evaluate the effects of the entire bill, but rather a small slice of it.”

Indeed, a more comprehensive analysis performed by MIT economist Jonathan Gruber modeled on available data from the Congressional Budget Office concludes that if one considers “delivery system reforms, new options, premium assistance, and other proposals to improve quality,” the Senate Finance bill does lower costs:

- Sizeable premium savings for young. An individual aged 25 at $19,000 in income (175% of poverty) would benefit from tax credits and would save, on average, $685. A higher income young person could always buy a “bronze” plan without tax credits for a savings of $230.

- Even larger premium savings for older individuals. A person age 60 with income at $19,000 (175% of poverty) would save, on average, $7890. A person at age 60 with income at $40,600 (375% of poverty) would continue to benefit from tax credits and would save, on average, $4100.

- Also large premium savings for a family. A family with income at $38,000 (175% of poverty) would save, on average, $8550. That same family with higher income could buy a “bronze” plan without tax credits at a savings of $2430 over current non-group prices.

As Gruber explained during an appearance on MSNBC, “I think the point that the premiums will go up, if penalties aren’t higher is exactly right. But that’s not what this report says”:

If the report had came out and said, ‘look we need stronger penalties, or premiums will go up,’ that’s a very valid point to make. But what the report says, is that it went too far. It said with the current structure, premiums will be much higher than they are today. And that’s just wrong. I mean, the non-partisan Congressional Budget Office has came out and said that for this bill, premiums in the exchange will be lower than they are in the none group market today. So they just drew the wrong comparison.

Read Gruber’s full report here.

Insurance Industry Issues Misleading Report, Promises To Increase Premiums By 111%

After months of publicly supporting health care reform, insurers are warning Congress that under the Baucus health care bill, “the cumulative increases in the cost of a typical family policy…will be approximately $20,700 more than it would be under the current system.”

The industry has issued a new report arguing that the weak personal responsibility requirement, taxes on health care providers, spending reductions in Medicare and taxes on high-value health plans will increase “the cost of coverage for both single and family policies in the individual, small group, large group, and self-funded insurance markets.”

Ezra Klein and Jonathan Cohn dispute the report’s methodology here and here, but it’s worth pointing out that industry’s argument that reform will increase insurance premiums for all Americans is simply untrue. It could also backfire. As Rep. Anthony Weinder (D-NY) explained this morning on MSNBC, “the health insurance lobby today fired the most important salvo in weeks for the public option“:

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%.

The reality is, some reform provisions would tend to make premiums higher than current-law premiums; other provisions would “tend to make them lower.” Americans from different income brackets will pay different amounts for health care, but on the whole, the Baucus bill, which provides affordability subsidies for Americans between 133-400% federal poverty line, will offer health insurance policies that are far more affordable than what the insurance industry report predicts.

Here is a comparison between the non partisan Congressional Budget Office’s analysis of the cost of premiums in the Exchange and the industry’s report. As it points out, under reform, Americans — even those that don’t qualify for a subsidy — will have far more affordable insurance options than industry’s “average” suggests:

Still, the Baucus bill must do more to control health care spending and lower premiums in the private market. After all, Congress shouldn’t force Americans to purchase unaffordable coverage. But for all their concern about ‘average health care costs’, insurers have a poor track record of controlling prices. As Families USA points out, insurers are “like a poker player who complains about his hand when, in fact, he is the dealer.”

Indeed, despite complaining about high health care premiums, insurers have lobbied against system-wide cost containment. They’ve spent millions of dollars opposing a public option that could reduce health case spending by some $150 billion and are even suing the state of Maine to increase premiums.

The insurance lobby is “conveniently forgetting that they imposed significant premiums increases during the past decade that are making health coverage unaffordable for families and businesses.” Now, since they’ve published a report promising to increase health insurance premiums even higher, the Senate must insert a public option mechanism (along with other cost-containment provisions) to competitively lower rates and keep the private health insurers honest.

Insurer Admits Industry Could Circumvent Proposed Regulations »

During today’s Michigan Business and Legislative Forum, which the Wonk Room attended, a representative of Blue Cross Blue Shield of Michigan admitted that insurers could circumvent the market regulations proposed as part of health care reform.

In answering a question about insurer market share, Mark Cook, Vice President of Governmental Affairs at BCBS Michigan, criticized for-profit insurers for maximizing their profit margins by only covering the healthiest and youngest applicants. “[I]f you have a business model that basically says, ‘I’ll take 25-year-olds until they get sick.’ That’s a great business.”

Cook conceded that health reform would not eliminate such risk selection. In a separate conversation with the Wonk Room, Cook agreed that that despite industry concessions to accept applicants with pre-existing conditions, existing health reform measures would not prevent insurers from designing benefit packages that excluded sicker populations:

WONK ROOM: I’m just wondering in terms of designing benefit packages the standards in the bill, at least the ones I’ve seen, at least the Baucus ones are actuarial standards, so you can design packages that kind of hide packages behind high deductibles, things like that.

COOK: Yeah I suppose there could be some , um, some industry folks could take, how do I want to put this? Could take, um, a low benefit design and try to market it heavily to a young, healthy population or something like that.

WONK ROOM: Right, you can design packages that attract different pools, right?

COOK: I suppose there could be some gaming that goes on around that if that is the design that ends up happening.

Watch it:

The Baucus bill requires insurers participating in the Exchange to offer plans in four different tiers. Each plan would have to meet a different actuarial-value. In the silver tier, insurers would have to cover 73% of the health care expenses of an average population; the remaining 27% would be picked up by individuals.

But Sarah Lueck at the Center on Budget and Policy Priorities warns, and Cook seems to agree, that “an actuarial-value standard on its own” would not prevent insurers from designing packages that would attract healthier applicants and deter “enrollment by those in poorer health.” “For example, insurers could offer a benefits design that omits or severely limits services needed by people with serious medical conditions, while offering richer benefits in other areas such as vision care or health-club memberships. In that way, an insurer could meet an actuarial standard while designing a package calculated to deter sicker people (by failing to cover basic services they need) and attract healthy ones.” Insurers could offer cheaper preventive services without any cost sharing but cover more expensive services only after a high deductible is satisfied.

As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”

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Health Insurers To Baucus: Allow Us To Charge Older People 5X More Than Younger Americans

Chairman Max Baucus’s (D-MT) original mark of the Senate Finance Committee’s health care bill used a modified community rating formula that allowed private insurers to charge older people five times more for coverage than younger people, a ratio that far exceeded the Kennedy and House bills’ 2:1 rating. On Tuesday the Chairman modified his mark with an amendment that lowered the rating to 4:1 and sparked a harsh response from the health insurance lobby.

In fact, today, in its second letter to the Chairman, America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni criticized Baucus — who is already requiring all Americans to purchase private health insurance — for improving the affordability measure. “If age bands are narrowed or “compressed” too much, premiums will rise significantly for these individuals, making coverage unaffordable, and resulting in a smaller and less stable pool, and higher premiums for everyone,” the letter warned:

The Mark’s original age band of 5:1 already reflects compression, relative to the natural distribution of underlying health care costs across age groups, and sets a balance whereby younger individuals are cross-subsidizing the cost of coverage for older Americans…For these reasons, we respectfully urge that you restore the age band to 5:1.

Ignagni and the health insurers support modified community rating and believe that in order for insurance pools to function, younger people must subsidize the costs of the sick. But insurers are apparently concerned that a 4:1 community rating would jeopardize the industry’s ability to attract a significant number of young people into high deductible policies outside of the exchange (in the remaining individual market). A 4:1 community rating would force insurers to charge younger people higher premiums and would presumably attract fewer enrollees; a 5:1 community rating would allow insurers to charge older people more and market more “affordable” (read: high deductible) policies to young and healthy applicants who pay more in premiums than they file in claims.

As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”

Watch it:

For more on ThinkProgress’ interview with Wendell Potter, click here, here, here, and here.

Insurers Write Baucus To Express Gratitude, Lay Out Concerns

America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni has penned a letter to Senate Finance Committee Chairman Max Baucus (D-MT), applauding the senator for proposing reforms that combine “insurance market reforms with the responsibility of individuals to obtain coverage and financial assistance for low- and moderate-income families and individuals.”

Ignagni agrees with the overall tenor of of the package, but lays out several top-line concerns. These are summarized below:

- Insurers Oppose 35% Tax On ‘Cadillac Health Plans’: The industry has long argued that it would pass any new taxes to beneficiaries in the form of higher premiums. Ignagni argues that without adequate cost controls, a growing number of policies would be affected by the tax (which is indexed to inflation, and not health care costs) and some Americans could be priced out of the market. After meeting with Democrats who oppose the tax, Baucus has said that he would raise the threshold for expensive insurance plans that would be affected by a new tax. “Given this dynamic, raising the thresholds would only impact how quickly consumers would hit the cap,” Ignagni writes.

- ‘Government Created’ Cooperatives = ‘Slower March Toward A Government-Run Plan’: Ignagni argues that cooperatives will retain certain competitive advantages. The cooperative would receive start-up funds “it would not have to be repaid” and “the government would continue to act as a “player and referee” with the Secretary of HHS serving as Chair of the “advisory board.” However, despite insurers’ concerns of increased competition the bill’s ‘network of cooperatives‘ would be unable to compete in today’s concentrated health insurance markets. As the CBO has concluded, “the proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.”

- Benefit Flexibility To Allow Insurers To Design Policies That Attract Healthier Enrollees: “This means that benefit packages should give consumers flexible options to meet diverse needs and be aligned with the level of premium subsidies provided by Congress, and that the coverage requirement needs to avoid creating incentives for healthy people to forego the purchase of coverage,” Ignagni writes. The letter also expresses concerns about the new national benefit standards.

In other words, insurers want to design packages that attract healthier applicants and deter “enrollment by those in poorer health.” “For example, insurers could offer a benefits design that omits or severely limits services needed by people with serious medical conditions, while offering richer benefits in other areas such as vision care or health-club memberships.” Well-defined standard benefit packages could preclude the industry from slowly moving everyone into high deductible policies.

- Retain Government Subsidy For Plans In Medicare Advantage: The Baucus bill would eliminate the 13% overpayment to private insurance plans that provide Medicare-like benefits at a higher rate, without improving quality. Under the bill, private insurers would have to submit to a competitive bidding process. “We have strong concerns about the proposed funding cuts in Medicare Advantage,” Ignagni wrote.

Ignagni expressed support for establishing a Medicare Commission (which would oversee Medicare spending) and system-wide payment reform.

AHIP Attempts to Portray Doctors as Villains

Our guest blogger is Emma Sandoe, Health Policy Intern at the Center for American Progress

In recent weeks, the Obama administration has refocused its campaign on current insurance market practices as the cause of rising costs.

Attempting to shift the blame to doctors’ fees, Karen Ignagni and America’s Health Insurance Plans (AHIP) released a report yesterday on out-of-network physician billing. “No politician has asked how much is being charged,” Ignagni said. HR 3200 requires disclosure on out-of-network costs, reduces overpayments, and changes Medicare payment rates to doctors and hospitals.

The study compared out-of-network billing rates to Medicare rates. Out-of-network physicians are free to charge non-negotiated, often times higher rates. The study attempts to show the arbitrary nature of procedure pricing or as Dr. Uwe Reinhardt calls it, “lunacy”:

“Some out-of-network providers are charging exorbitant prices – several hundred or even over a thousand percent of the Medicare reimbursement for the same service in the same area. Recent examples: … $40,000 for a total hip replacement when Medicare would have paid $1,558.”

While physician fees are a part of the cost problem, this study does not show the role of private insurers in the billing process and fails to address in-network private insurance billing rates, which make up over 90% of claims. Including these lower in-network rates would undoubtedly prove that a vast majority of billing rates are lower than the excessive out-of-network rates.

Moreover, the procedures by the insurance industry are not comparable across Medicare and private insurers. Procedures such as hip replacement, coronary bypass, and cataract surgery are more common in the +65 year old population and oftentimes involve more expensive conditions in younger patients.

Highlighting Medicare as a comparison is deliberative. Back on the offensive, AHIP is resorting to their previous cost shift argument that the government reimburses too low forcing insurers to pick up the cost.

Health Insurance Executives Undermine Insurance Lobbyist’s Pledge To Reform Insurance Market

This afternoon, during an interview with Bloomberg Radio, Karen Ignagni — the President and CEO of America’s Health Insurance Plans (AHIP) — criticized lawmakers for vilifying the insurance industry and reiterated insurers’ commitment to reforming the health insurance marketplace. “Our members have worked now for three years to contribute to the debate, to put insurance market reform squarely on the table…We’re for it. We understand how to do it, and we’ve been leading the charge and urging members of Congress to move forward,” Ignagni, the industry’s top lobbyist, stressed:

That’s what people want. They want to be in. They don’t want to be rejected because of preexisting conditions, and they want to make sure they have continuity of care. We’ve committed to that. That’s what our industry is doing. We are one of the first to step up and offer real change that affected our industry. And we’re still committed to that.

While the insurance industry has publicly supported regulations that would guarantee everyone coverage and outlaw pre-exising condition exclusions, Ignagni may be overstating the industry’s commitment to so-called “market reform.” On June 16th, despite Ignagni pledges of commitment, insurance executives from UnitedHealth Group, Assurant, and WellPoint specifically refused to “commit” to ending the controversial practice of rescinding coverage after an applicant files a medical claim.

Watch a compilation of Ignagni’s claim and insurers’ refusal to end rescission:

In its investigation of insurer practices, the Energy and Commerce Subcommittee on Oversight and Investigations concluded that far from “leading the charge” on reform, Assurant Health, UnitedHealth Group, and WellPoint have rescinded policies for almost 20,000 individual insurance policyholders” and avoided paying more than $300 million in medical claims” over the last five years. From its review of case files, the Committee identified “a variety of abuses by insurance companies, including”:

- Conducting investigations with an eye toward rescission in every case in which a policyholder submits a claim relating to leukemia, breast cancer, or any of a list of 1,400 serious or costly medical conditions;

- Rescinding policies based on an alleged failure to disclose a health condition entirely unrelated to the policyholder’s current medical problem;

- Rescinding policies based on policyholders’ failure to disclose a medical condition that their doctors never told them about;

- Rescinding policies based on innocent mistakes by policyholders in their applications; and

- Rescinding coverage for all members of a family based on a failure to disclose a medical condition of one family member.

As former health insurance executive Wendell Potter argues, insurers seek to “drive down” costs by refusing to insure “unhealthy people,” a tactic borne out by the fact that 47 million Americans currently lack health insurance. The “insurance industry has been one of the most successful, in beating back any kinds of legislation that would hinder or affect the profitability of the companies,” said Potter, the former head of Corporate Communications at health insurance giant CIGNA.

Health Insurance Industry Fudges Data To Downplay Its Astronomical Profits

America’s Health Insurance Plans (AHIP) — the lobbying arm of the insurance industry — maintains that “for every dollar spent on health care in America, approximately 1 penny goes to health plans’ profits.” The group’s health care reform website offers the helpful visual of a subdivided dollar bill: “Fact Check: Setting the Record Straight on Health Plans’ Profits,” one blog post exclaims. Only one one-hundredth of the premium dollar is pocketed by the insurer, the rest is spent on providing medical care.

But as NPR’s All Things Considered points out the group’s “fact check” is itself misleading, since insurers are measuring their profits against total health care spending, not company revenues. “All that statement says is, if you eliminated all our [insurance company] profits, national health spending in America would be 1 percent lower. It has meaning only in that context,” health care economist Uwe Reinhardt explains. Within the context of companies’ revenues, insurers skim off 15-20 percent of premium dollars for administrative costs and profits. In fact, an examination of insurers’ medical loss ratio — the fraction of revenue from a plan’s premiums that goes to pay for medical services– suggests that within the last 10 years, insurers have been spending less on medical care and more on administrative costs or profits:

Moreover, a report by Families USA found that “insurers in the individual market sometimes maintain medical loss ratios of only 60%, retaining 40% of premium dollars for administration, marketing and profit.” “For the 10 biggest insurers in the year 2006 (the year the insurers used for the 1 cent out of every dollar depiction above), profits were anywhere from 2 to 10 percent, or two to 10 pennies on the dollar. That’s two to 10 times as much as what the insurance industry group suggests in its illustrations.”

The top five earning insurance companies averaged profits of $1.56 billion in 2008 and reported spending an average of “more than 18 percent of their revenues on marketing, administration, and profits.” That year, CEO compensation for these companies ranged from $3 million to $24 million.” Below is a partial list of insurer/CEO profits:

CEO compensation seems to be decreasing, if ever so slightly. A survey by Modern Healthcare “of compensation for the health care CEOs” failed — for the first time in seven years — to turn up a healthcare CEO who raked in more than $15 million in compensation last year.” The performance of the stock market in 2008 was a big reason that the compensation of the 30 CEOs covered by the survey was relatively low, Kaiser Health News noted. But the “relative down year” for these executives “probably won’t generate much empathy” for them because “the median compensation… was still a bit more than $4 million. Moreover, as the detailed disclosures on executive pay required by the U.S. Securities and Exchange Commission show, every CEO has stock options that could be worth millions as the equity markets recover.”

Despite lower than expected profits, insurers are not holding back. The industry already set records from January to March, “when health-care firms and their lobbyists spent money at the rate of $1.4 million a day” on campaigns designed to influence the health care reform legislation now moving through Congress.

Health Insurers Spent $173 Million To Defeat Public Option, Affordability Measures

Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP)

Answering the GOP’s call, AHIP’s director of strategic communications, Robert Zirkelbach, promised that the trade group is “going to be very active,” implying that the lobby is urging industry employees to “go to town meetings with members of Congress in August to confront them”:

We have people on the ground in more than 30 states. There are thousands of industry employees who have now had their integrity called into question. They want to have their voices heard as part of this.

Insurers are willing to accept limited government regulations (modified community rating, guarantee issue) — as long as all Americans under the age of 65 are required to purchase private coverage. In an interview with the New York Times, AHIP President and CEO Karen Ignagni “noted that the industry had endorsed many of the administration’s proposed changes, including ending the practice of refusing coverage for pre-existing conditions, and said it would work with lawmakers to develop a bill that did not include a public plan.” “The rhetoric that we are hearing is reminiscent of ’93, ’94, but we’re on the 2009 playbook,” she said, adding, “The inconvenient fact is that we support those reforms.”

Ignagni’s conciliatory tone obscures the lobbyist’s efforts to derail the public option and certain industry regulations. In her view, no entity — certainly not the government — should compete for the business of the uninsured; they are the private industry’s entitlement. Insurers spent “about $40 million on an army of lobbyists and lavishing campaign contributions on Democrats and Republicans to kill the public option. In all, the health industry spent $133 million in the second quarter alone, more than a million bucks a day.” According to the Wall Street Journal, insurers are also “pushing back against several proposals that lawmakers see as favorable to consumers. One proposal would prevent insurers from charging older Americans more than twice the rates charged to younger people. Insurers want to be able to charge older people as much as five times more.” WellPoint Inc., the nation’s largest insurance company, has set up an “online network where it makes the case against the public health insurance plan and urges consumers to contact their elected officials.”

The industry may not be re-playing the old ‘Harry and Louise ads,’ but it’s certainly twisting the legislation in its favor. If reports about the Senate Finance Committee’s bill are accurate — the bill will not contain a public option and would allow insurers to charge older Americans more than 7.5 times the rates charged to younger Americans — then the $173 billion the industry has spent on lobbying Congress was certainly a smart investment.

BC/BS’s Attacks: Health Insurers Fear They Have Something To Lose

Just days after promising to “work together” with President Obama and Congress “to provide quality, affordable coverage and access for every American,” North Carolina’s Blue Cross Blue Shield is “putting the finishing touches on a public message campaign” aimed at defeating a new public health plan option:

In three 30-second videos, the insurer paints a picture of a future system in which patients wait months for appointments and can’t choose their own doctors, according to storyboards of the videos obtained by the Washington Post.

Insurers are working hard to protect their monopoly for covering Americans under 65 and the threat of a public options if motivating insurers to support cost containment and embrace of tight government regulations. They figure: agree to modified community rating now, hold off (i.e. eliminate the need) a public option in the final legislation.

But ironically, by attacking the new public option the industry is showing its hand. They oppose the public plan not because it will do what they claim — force patients to “wait moths for appointments” and not allow them to “choose their own doctors.” If that were the case, who’d sign up for such a thing? If the public health care plan really rationed care, then most Americans would stay with their private insurers.

They fear a public option because it may actually provide comprehensive benefits at a lower price and attract new beneficiaries. They fear it, because it would force them to compete with it. And for most Americans that would be a good thing.

Health Care Industry Letter Challenges The CBO To Find Savings

This year’s effort to reform health care is the year of strange bedfellow coalitions. A number of of industry-union-consumer group alliances like Better Health Care Together, Divided We Fail, The Health Care Dialogue and more, have already rhetorically devoted themselves to reducing health care costs and expanding access to better quality care.

Today, another round of doctors, hospitals, drug makers and insurance companies are “voluntarily coming together” to present President Obama with a letter promising to reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years, lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth.)

Administration officials estimate that with such reductions, a family of four would save $2,500 and by 2019 national health expenditures would decrease by 3 percent of GDP, or $700 billion. The fiscal gap would shrink by 5 percent of GDP and the nation would inch towards a sustainable fiscal trajectory, they project.

The numbers are significant, impressive, but short on specifics for how industry will reduce costs. Early reports indicate that the signers — the Advanced Medical Technology Association (AdvaMed), America’s Health Insurance Plans (AHIP), the American Hospital Association (AHA), the American Medical Association (AMA) and Pharmaceutical Manufacturers of America (PhRMA), among others — hope to contain costs by implementing “aggressive efforts to prevent obesity, coordinate care, manage chronic illnesses and curtail unnecessary tests and procedures; by standardizing insurance claim forms; and by increasing the use of information technology, like electronic medical records.”

The industry is suggesting that these cost containment measures — which don’t score too well with the Congressional Budget Office — would in fact yield cost savings and help finance health reform. The letter blunts conservative critics who argue that health reform is unsustainable or too expensive, and it also takes on the CBO, whose models are likely under-scoring the savings from reforms.

Industry groups stepping up and committing themselves to supporting common sense — even progressive– cost containment measures is a major political victory for the administration, one it can use to pressure the stakeholders to adopt reforms. Still, as Paul Krugman argues, “the point is that there’s every reason to be cynical about these players’ motives. Remember that what the rest of us call health care costs, they call income.”

Media Buys What The Health Insurance Industry Is Selling

During yesterday’s hearing before the Senate Finance Committee, America’s Health Insurance Plans President and CEO Karen Ignagni attempted to discourage Democrats from enacting a new public health care plan by reiterating the industry’s support for guaranteed issue — offering coverage to every applicant — and modified community rating — charging everyone the same premiums — (so long as both regulations are paired with an individual requirement to buy insurance).

Press coverage of the event centered around the insurance industry’s so-called “concessions”:

- AHIP Pleads Its Case: Regulate Us: “In a rare sight on Capitol Hill for any industry, health insurers practically begged senators Tuesday to regulate their livelihood rather than subject them to the fierce, and potentially lethal, competition that would ensue if lawmakers unleash a government-run public insurance option on them.” [National Journal, 5/06/2009]

- Insurers Offer Concession On Premiums: “Health insurers have offered to submit to a series of restrictions they contend would add up to a fairer marketplace and cut into the ranks of the 50 million uninsured.” [Boston Globe, 5/06/2009]

- Health Insurers Agree to End Higher Premiums for Women: “It was the latest concession by insurers as Congress drafts legislation to overhaul the $2.5 trillion health care industry.” [NY Times, 5/06/2009]

The industry had offered similar concessions in December 1992, before launching an all-out attack on President Clinton’s health care reform efforts. Of course, that’s not to say that insurers will adopt a similar strategy this time around. Ignagni and her team may run issue ads against certain provisions but are unlikely to oppose the entire effort.

Still, before we credit the industry for cooperating with progressive reformers, we should consider Ignagni’s proposal. The industry envisions a reformed marketplace in which everyone is required to purchase coverage. In return, insurers would no longer deny coverage to Americans with pre-existing conditions or charge sicker Americans higher premiums than healthier Americans. Women would not pay more than men and insurers would invest more in preventive care and care coordination.

But as Howard Dean pointed out in an interview with ThinkProgress, “if we only get community rating and guaranteed issue that’s great insurance reform, but that is not health care reform and nobody should mistake it.” Indeed, reforming the insurance industry is all about restoring competition. Already, “1 in 6 metropolitan areas in a 2008 study of more than 300 U.S. markets is dominated by a single health insurer that controls at least 70% of consumers enrolled in health maintenance organizations or preferred provider organizations.”

Such consolidation negates any real competition, preventing insurers from having to negotiate prices and lower premiums. In fact, while “there have been over 400 health care mergers in the last 10 years,” premiums have risen “nearly eight times faster than average U.S. incomes.” Insurers fear a public plan because it has the potential to work all too well, force private plans to lower prices and cause some enrollees to shift to public coverage. And it’s this fear that’s drawing insurers to the reform table.

A new public plan, after all, would complement the private market and offer Americans a real choice of coverage. It would also help pioneer new payment and quality-improvement methods that could set the standard for private plans and use its lower administrative costs and bargaining power to better control health care costs.

Ignangi points to the Federal Employees Health Benefits exchange — which does not include a public health option — as an example of a successfully regulated health care market. But as Jacob Hacker argues, “FEHBP’s annual growth rate of per enrollee spending averaged 7.3 percent from 1985 to 2002 (the most recent currently available data year) compared with 5.8 percent for Medicare. Indeed, the growth rate for FEHBP is virtually identical to that for private health insurance over this period.”

The industry’s so-called “concessions” are designed to protect their monopoly over the health insurance market, not lowering health care costs or offering Americans better quality care.

Insurers Respond To Schumer’s New Public Health Plan Compromise »

Today’s Senate Finance Committee hearing on coverage options may have started with single-payer advocates loudly protesting the limited discussion of single-payer reforms, but the bulk of the conversation revolved around the public plan option.

Earlier today, Sen. Chuck Schumer (D-NY) released an outline (largely based on CAP’s report on the public plan) for how a new public health option could compete on an equal playing field with private insurers and Senate Democrats pressed representatives of the private insurance industry to reply to Schumer’s proposal.

Sen. Robert Menendez (D-NJ) asked BC/BS Association CEO Scott Serota to explain “what is the principle position in the opposition that the association has” to fair competition. Serota argued that health insurance markets are already overflowing with competition and stubbornly insisted that it would be impossible to design an equal playing field (Listen here).

America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni told Schumer that AHIP “appreciate[s] how thoughtful you are working to reconcile all these different views” but insisted that private insurers would be unable to fairly compete with a Medicare-like public plan that did not have the capital reserves of private insurers or the ability to build networks of providers:

There are a significant amount of Capital requirements that we need to meet, Medicare would have failed the capital test right now and so that is a very significant dollar figure that would have to be imbued into this plan and I know you’ve thought about that. The third issue is the payment issue…it would take a very long time, for government to develop the infrastructure to negotiate with physicians. Government doesn’t have networks, can’t put together networks, the Disease Management program failed in traditional Medicare and we all know why—because there’s no predictability with respect to who’s coming through the doors to the physicians’ offices, etc.

Listen:

But here, Ignagni’s sense of fair competition is itself unfair. Ignagni does not want a new public health insurance plan to have any inherent advantages, but she’s insisting that private insurers preserve their advantage to create provider networks and enter or exit markets as they wish, etc. As Schumer pointed out, “it’s sort of as if you’re saying well the public advantages we should get rid of, but the private advantages we should keep. Let them compete.” (Listen here).

Indeed, while Ignagni is seeking to clone the public model into a private plan, most public public plan advocates envision a system in which both private and public plans compliment each other and one in which each plan uses its inherent advantages to offer Americans a real choice of coverage. So, while the public plan does not have explicit capital reserves like private plans, it will not be able to enter and exit different markets like most private plans could. Public plans may not have different networks of providers but it is a reliable source of coverage that contracts with any provider who is willing to accept its reimbursement rates (like Medicare does). In other words, public and private plans are inherently different and will use those differences to compete and attract beneficiaries.

Ignagni also argued that if the new public health option reimbursed providers at a lower rate than private plans, hospitals and doctors would shift the cost difference onto Americans with private insurance. But this too assumes that private plans are always right in setting reimbursement rates. As it turns out, however, “high payments from private insurers do not result from low payments for Medicare patients.” As one recent MedPac study found, “claims of extensive cost shifting imply that hospital costs are largely fixed and that it is hospitals in the worst financial sate that will have the greatest need and incentive to shift costs onto private payers due to low Medicare payment.” But MedPAC concluded that “it is the most financially pressured hospitals that are most efficient and thus capable of earning money on Medicare patients.” In other words, over-paying providers, as some insurers do, will not slow the growth of health care.

As Schumer concluded, “the private sector will have some advantages and we can’t just get up and say public advantages we should just get rid of in this competition, but the private sector advantages we shouldn’t.”

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Illinois Lawmaker On How Insurance Industry Tried To Kill Reform Bill »

During the White House Health Summit, AHIP CEO Karen Ignagni told the president, “we understand that we have to earn a seat at the table…you have our commitment, to play, to contribute and to pass health care reform this year.”

Indeed, this year, the industry has portrayed itself as a proponent of comprehensive health reform and its health care proposal has generated a slew of positive media coverage. But some still question the industry’s sincerity. Will AHIP support health care reform that lowers the industry’s profit margins, and will the insurance industry sacrifice profits for progress, these critics ask?

The industry’s opposition to Illinois State Representative Gregg Harris’ (D-Chicago) effort to pass legislation regulate the individual insurance market may begin to answer these questions.

Recently, the Illinois House passed ‘The Health Insurance Consumer Protection Act (House Bill 3923),’ a bill designed to regulate the state’s ‘Wild West’ individual health market. The act requires insurance companies to “spend at least 75% of premium dollars on medical care rather than on executive salaries,” establishes an office to conduct “external independent reviews of denied claims and rate increases” and simplifies “the complicated application process for both individual and small group markets by creating a standard application.”

ThinkProgress spoke with Harris, who explained that while the insurance industry initially supported his efforts, it opposed the actual legislation:

It’s the same kind of language they’ve talked about at the national level: “We could be supportive of some of this stuff if there was an individual mandate,” and “we’re willing to talk and negotiate and talk about parts of the bill.” But when it came time for the vote, they were out in pretty strong opposition. Every procedural trick in the book was used to stall it and derail it on the last day, but we got it through.

Listen:

Reform on the national level “is going to be very difficult,” Harris explained. “You’re really going to have to stand up to some powerful interests to get done and people are going to have to make a decision. Where are your votes going to be as a legislator? Are they going to be to protect consumers, or are they going to be to protect an industry giant?”

The Health Insurance Consumer Protection Act will now move to the Senate where, Harris predicts, “the opposition will be just as strong.”

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Ignagni: Government Role In Health Care Is Fine…As Long As It’s For Supporting Health Insurance Industry »

AHIP’s President and CEO Karen Ignagni (pronounced ig-NAH-nee) walks a tight rope when discussing the government’s role in the health care system. While rejecting direct competition between public and private insurance plans, Ignagni argues that the government should subsidize the industry’s insurance product (she calls it making health care “affordable”), provide coverage for the the poorest and sickest Americans, and require everyone to purchase insurance:

For government, then, as we think about responsibilities, our responsibility to get everybody in, to sustain coverage, to do it affordably, government, to begin to step in, require personal responsibility, but at the same time provide this helping hand or provide this assistance for people who are going to need help.

Watch it:

The government, Ignagni argues, should serve as a “helping hand” and provide peace of mind — but only so far as it benefits insurer interests. For instance, Ignagni and AHIP endorse a government-public hybrid health care system on one hand, but reject direct private/public competition on the other. Private insurers should have the exclusive right of insuring Americans under 65, because giving Americans a choice between a private and public plan would drive private insurers out of business, Ignagni argues.

But the stance is grounded in opportunism, not principle. While Ignagni is trying to keep a viable public program from entering the under 65 market, she strongly lobbied to increase the role of private insurers in Medicare — and argued that public-private competition in the over 65 market would increase patient choice. (Note that she did not ask for fair competition. Private plans participating in Medicare Advantage receive a 13-17 percent government subsidy). Here is Ignagni defending the subsidy:

- Are we going to maintain choices [in Medicare] in all markets or reduce or eliminate and the particular thing I would like to leave you with, I will be talking about the history in a moment. [Kaiser Foundation, 7/16/2007]

- But if you have the goal of maintaining choices in all the areas and if you have monopoly systems that refuse to contract with the health plans, if you are going to achieve that goal of maintaining choices in all areas, you have very few choices and that is also why private fee for service was developed. [Kaiser Foundation, 7/16/2007]

In short, Ignagni wants to play in the government’s sand-box but is desperately trying to keep the under-65 playpen all to herself.

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AHIP To America: Protect Our Market Monopoly And We Will Maybe Charge Everyone The Same Premiuims

Yesterday, America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association formally announced that the insurance industry would be willing to charge every American the same price for health insurance coverage in the individual insurance market if the government protected its market monopoly, required all Americans to purchase their insurance product and held off on the new public health option:

Specifically, by enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe that we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market. While we support transitioning to a reformed system in which health-status-based rating is no longer used, rating flexibility based on age, geography, family size, and benefit design is needed to maintain affordability.

You’ll recall that one of the main criticisms of Sen. John McCain’s (R-AZ) health care plan was that it shifted too many Americans into the unregulated individual insurance market, where higher risk patients — women, older Americans, those with pre-existing conditions — could be charged unsustainable premiums. In December, AHIP promised to reform the market by providing everyone with coverage if everyone was required to purchase insurance, and has since argued that it supports the President’s vision for health care reform.

The media has happily amplified their message. Today, the New York Times, USA Today and the Washington Post framed AHIP’s announcement as an unprecedented concession — the industry coming to the table in good faith to reform the health care system and save the American worker from skyrocketing health care costs:

- “Tuesday’s proposal marked one of the first concrete steps forward in the process.” [USA TODAY, 3/25/2009]

- “Tuesday’s proposal, included in a letter to Senate leaders by the industry’s two main trade groups, is the latest move by health insurers to position themselves as constructive participants, rather than obstacles, in the debate over how to overhaul the U.S. health-care system.” [WSJ, 3/25/2009]

- “The industry’s flexible position on the issue came as a surprise to lawmakers, and could make it easier to reach an agreement in Congress because it narrows the issues on which insurers are ready to fight the Democrats who control Congress and the White House.” [NYT, 3/24/2009]

But it’s unclear what exactly AHIP is conceding. For one, the industry made very similar “concessions” in December of 1992, promising to “provide the standard package ‘regardless of a person’s medical history‘” and work with the government to “stabilize health-care prices” if everyone was required to purchase insurance. This latest proposal is, for the most part, just a regurgitation of past efforts — proposals the industry rejected once the administration proposed an actual plan.

And, this time, AHIP has nothing to lose. They’re asking the government to protect and even increase its monopoly over providing insurance to Americans under 65 and to strengthen safety net programs that would siphon off the poorest (read: sickest) Americans.

In turn, insurers will charge their new clientele the same rate. But the industry did not rule out charging different rates “according to age, geography, family size and plan design.” That means that a person in a wealthier area (who is generally healthier) could be charged a lower price than someone from the inner city (and in poorer health). Ignagni likes to argue that the stakeholders must show “leadership” in the health care reform debate; she doesn’t often discuss the financial sacrifices the insurance industry is willing to adopt to bring about reform.

AHIP Explains Its Opposition To The Public Plan

America’s Health Insurance Plans (AHIP) — the insurance industry’s lobbying arm — is hosting a health care policy forum in Washington D.C. This is the second of a series of posts from inside the conference.

When ThinkProgress asked AHIP spokesperson Robert Zirkelbach about the lobby’s opposition to a public plan, Zirkelbach explained that the insurance lobby was concerned the the “government-run program” (as he called it) would undermine health care providers, employers, and the “sustainability” of the entire health care system”:

- Impact on providers: “Public programs pay less than their costs and those costs are being passed through the health care system and it’s ultimately employers and consumers who are footing the bill.”

- Impact on the employer community: “This could cause many people to leave the employer market and enroll in a government-run plan. This is something employers have expressed concern.”

- Sustainability of our current health care system: “Medicare actuaries say that the Medicare system is going to start running deficits as soon as 2017. We have to make sure we’re using our public resources as responsibly as we can — as we can. We believe in a public program”

Watch it:

A public plan would actually alleviate AHIP’s “concerns” about runaway health care costs and running deficits. As Harold Pollack argues rather succinctly over at The Treatment, “experience suggests that effective public programs provide high-quality, cost-effective care” and it would “have greater leverage in encouraging standardized quality improvement strategies and electronic medical records.”

A public option could reduce projected health care costs by about “$2 trillion over 11 years, and lower premiums by about 20% on average.” Within a decade, 105 million people would be enrolled in the public plan, and about 107 million would have private insurance.

But brush AHIP’s objections aside, and their real concern is sacrificing profits to competition. Medical loss ratios, an indicator of how much revenue insurance companies spend on care vs. how much they keep as profits, have dropped precipitously in the last decade. Forcing private insurers to “shave-off” some administrative costs and compete with a public option may very well reverse that trend.

For policy makers, this is really an argument about the proper role of government. As Dean Baker argues, “some people, who tend to be left of center, think that the government’s role is to try to promote the general good, by providing basic services, protecting the poor and the sick, and ensuring a well-working economy. On the other hand, there are others, who usually place themselves right of center, who believe that the proper role of government is to redistribute as much income as possible to the wealthy. These competing views of government are coming to a head in the debate over national health care reform.”

NFIB Dumbfounded When Asked: ‘Where Do You See Compromise On Your Side’? »

Today, America’s Health Insurance Plans (AHIP) — the insurance industry’s lobbying arm — is hosting a health care policy forum in Washington D.C. This is the first of a series of posts from inside the conference.

AHIP bills its National Policy Forum as “the nation’s premier conference for health industry executives, health policy analysts and experts for in-depth discussions and a diversity of perspectives on the most challenging health care policy issues facing our nation.”

But when ThinkProgress asked National Federation of Independent Businesses (NFIB) President Dan Danner — whose organization opposes Obama’s employer mandate — where he’s willing to compromise with the President to pass comprehensive health care reform, Danner couldn’t answer this “challenging health care policy” question. After several seconds of silence, Danner simply reiterated his support for reform:

I mean, we’re anxious to get a solution. Compromise on what? I think that’s the — one of the challenges, if you’re talking about comprehensive health care, it’s a very complex puzzle, and how you fit all of the pieces together. You know? I don’t think that you can take any part of comprehensive health care in isolation. You have to talk about how’s all this fit together?

Watch it:

While all of the different stakeholders argue have claimed that they’re willing to compromise, few have specified specific points of concession. As Time Magazine reporter Karen Tumulty pointed out, “I think we’re all going to learn over the next few months, how and whether the environment really has changed all that much since 1994.”

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