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.”

Insurance Industry Offers Alternatives To Enforcing The Individual Mandate

Top health insurance lobbyist Karen Ignagni — the President and CEO of America’s Health Insurance Plans — has a solution for everything. Yesterday, just days after releasing a poorly received report on premium increases, Ignagni testified before the Senate HELP committee and insisted that insurance market reform is only possible if everyone buys into the system.

“If members of Congress are concerned about” imposing high penalties on individuals who don’t purchase coverage, “we’ve offered some alternatives to achieve universal participation,” Ignagni helpfully suggested:

- Higher rates in subsequent years: “If you don’t participate in year one, you pay more in subsequent years.”

- Loss of personal exemption: “If you didn’t participate you lose your personal exemption on the state level.”

- Auto enrollment: “We’ve been looking at auto enrollment for people who are eligible for subsidies.”

Watch it:

“There are ways to solve those problems, and we’re committed to working with you to solve the problems,” Ignagni said, in classic conciliatory form. “We don’t want to let Americans down. It’s very important. We promised that we are committed to this. Our industry is for-square behind it, but we have an obligation to explain how to make that happen.”

If penalties aren’t higher, premiums will go up and Ignagni’s solutions for getting more Americans into the system could play well on the hill. But she hasn’t solved the problem of affordability. The Senate Finance Committee lowered the mandate standards because it did not have enough money for a robust subsidy program or the political will to establish a public option (or other proposals that would have significantly lowered premiums). Now, the industry is asking Congress to design policies that strongly encourage Americans to purchase coverage without offering to lower premiums.

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.

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.

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 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.

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.”

Transcript: More »« Less

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.

Transcript: More »« Less

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.