US Health Insurers Up the Ante
The chutzpah shown by the U.S. health insurance industry in taking aim at the weakest reform bill in Congress – the one approved by the Senate Finance Committee – reflects the insurers’ sense that they have beaten back other proposals that might have represented significant threats.
Not only was a national single-payer approach never allowed on the table – since it would have been the death knell for the private industry – but even the most “robust” public-option bills contain major concessions to the insurers, including sharp limits on who could qualify for a government-run program and delays on when the new program might take effect.
Perhaps the most striking passage in the House Ways and Means Committee’s 1,018-page bill – regarded as one of the most liberal – is the definition of “Y1,” year one when an insurance “exchange” with a public option would become available to individuals and small businesses.
“The terms ‘Y1’, ‘Y2’, ‘Y3’, ‘Y4’, ‘Y5’, and similar subsequently numbered terms, mean 2013 and subsequent years, respectively,” the bill states on page 14.
In other words, even if Congress approves a public option, the health insurance industry gets more than a three-year reprieve before it would have to begin competing and then the competition would be limited to small businesses and to individuals.
It also means that Americans facing a health-care crisis today can’t expect meaningful help on health insurance until 2013. In the meantime, they are to be left to the mercies of private insurers.
The industry also won a major concession when Democrats agreed to exclude large companies as possible enrollees in the public option.
At the start of the congressional debate, Republicans cited an industry-backed study from the Lewin Group warning that if a public option were approved, an estimated 119 million Americans might defect from private plans. That, in turn, might badly damage the profits of the health-insurance industry.
Or as Sen. Chuck Grassley, R-Iowa, put it in a column for Politico.com, the exodus of so many customers would “put America on the path toward a completely government-run health care system. … Eventually, the government plan would overtake the entire market.”
So, Democrats made moves to protect the industry. Rather than a public option available to everyone, including large companies that are currently struggling to pay health-insurance premiums for their workers, the public option would be allowed only for individuals and small businesses. Private insurers would get to keep the biggest and most lucrative part of the market, the large companies and their employees.
Based on that concession, the non-partisan Congressional Budget Office estimated that the number of Americans who might sign up for a public option was about 10 million, a much smaller threat to the private insurers.
The time horizon for the public option also began fading into the fairly distant future. To minimize attacks on the 10-year cost of the program, Democrats pushed the starting point for the exchanges, where private insurers supposedly would compete with the public option, back to 2013.
The delayed implementation pushes higher costs for health reform outside the 10-year window (and thus makes the program look cheaper), but it means that Americans can expect little improvement in their health-insurance coverage for the next three-plus years. [To see the expected annual costs of the Ways and Means bill, go to the CBO analysis and look at the table on the last page.]
So, Americans who right now are facing financial crises over health costs or who are going without necessary medical care because they are uninsured or underinsured will be expected to somehow suck it up for several more years.
Politically, the Democrats have put themselves in a position where even if they pass a bill with the public option, they will have to survive the 2010 and 2012 elections based not on what they have done for the American people but what the future might hold – and Americans are notoriously impatient.
Meanwhile, the Republicans will get to pummel Democrats for promising better health-care results – and for delivering nothing of note.
There’s also the prospect that a new Republican Congress in 2011 or a new Republican President in 2013 could move quickly to repeal any public option that might have survived in the legislation. Since the people will not have experienced any benefits from the not-yet-implemented public option, there wouldn’t be a powerful constituency to fight for it.
And, a Republican-controlled Congress and GOP President wouldn’t hesitate to ram revisions of the health-care reform through on a majority vote under the budget “reconciliation” process, as a Republican Congress did with tax cuts during George W. Bush’s presidency.
With these political prospects ahead, the health insurance industry apparently believes it has weathered the worst of the reform storm and can begin zeroing in on a few lesser irritants, like trying to get Congress to ratchet up the coercion on the nearly 50 million uninsured Americans so they will be forced to sign up for private insurance policies.
In a brazen act that took Democrats by surprise, America’s Health Insurance Plans, the industry’s lobbying arm, went on the attack against the industry-friendly Senate Finance Committee bill because of relatively weak penalties of only a few hundred dollars a year assessed against people who don’t buy insurance even with government subsidies.
AHIP feared that the fines wouldn’t be coercive enough to force young people to buy insurance. Thus, the worry was that the industry's new sign-ups would be customers the industry doesn’t want, people who need medical attention.
So, industry lobbyists warned that if Congress didn’t raise the fines on the uninsured, the industry would jack up its premiums across the board. "The consequences of this would be an upward spiral; rate shock to everyone who stays in," AHIP president Karen Ignagni said.
While the White House and congressional Democrats suggested that the industry had committed a blunder and risked a political backlash, the assault on the Finance Committee bill, which already had bent to the industry’s will by excluding a public option, could be read as an act of confidence.
On Tuesday, Ignagni published an op-ed in the Washington Post defending an industry-sponsored study that warned of higher rates if harsher penalties were not included to force Americans to buy insurance. But the article also revealed how modest the industry sees likely cost savings from reform.
Without reform, “the CBO projects that health-care spending will rise at an annual rate of 6.2 percent for the next decade,” Ignagni wrote. “We believe the nation can bend the cost curve by 1.5 percentage points annually if reform includes systemwide efforts to reward best practices, shrink the wide variation in care, expand care coordination, and equip doctors and patients to make decisions based on what works.”
Ignagni then chastised Congress for its supposed unwillingness to address these medical changes. She wrote:
“The shared promise of health-care reform is guaranteeing access to affordable coverage for those outside of the system while ensuring that those who have coverage can keep what they like. That promise can be kept only if Congress puts the nation on a path to universal coverage and confronts what lawmakers have thus far been unwilling to address: the need for tangible, effective steps to reduce the growth in health-care costs and make the system sustainable for generations to come.”
Remarkably, Ignagni’s suggestions for trimming the annual increases in health costs – from 6.2 percent to a still hefty 4.7 percent – rested on restraining costs associated with what doctors and hospitals charge, not on demanding sacrifices from the insurance industry.
Indeed, the industry may believe it has dodged the most dangerous bullet aimed at its administrative expenses and profits, stiff competition from an across-the-board government-run plan.
According to the CBO, the only meaningful way to wrest significant savings from the insurance side of the cost equation is to force private insurers to compete with a public option.
Assessing the five reform bill that have cleared different committees of Congress, the CBO said the nation would get the most savings on health-care costs from a public option tied to Medicare rates. Such a version, which is included in two of the House bills including the one from the House Ways and Means Committee, would save an estimated $110 billion over 10 years.
Those savings presumably would be substantially more if the public option were made available to large employers, not just small businesses and individuals. But the industry appears to have killed that possibility.
An even more modest public option in another House bill, which de-links the rates from Medicare and would require negotiations with health-care providers, would save an estimated $25 billion, the CBO said. By contrast, the co-op idea in the Finance Committee bill would cost $6 billion to set up and would garner few if any savings.
Little to Fear
But even if a “robust” public option, like the one in the House Ways and Means bill, is approved, private insurers apparently sense they have little to fear. Otherwise, industry lobbyists probably would not have taken the risk of criticizing the Finance Committee bill.
Though Democrats have fumed about the industry’s arrogance – and have claimed that chances for some form of public option have improved – the Democrats show no sign that they will up the ante on the industry and provide meaningful relief for hard-pressed Americans now.
Democrats could, for instance, shake the industry up by expanding the availability of the public option to larger businesses and by speeding up the effective date, from 2013 to, say, 2010.
Right now, the Democrats are running a huge political risk by raising expectations of voters and then not delivering anything that helps much until after the next two election cycles. Starting the public option before the 2010 election or at least before the 2012 campaign might go a long way toward persuading voters that the Democrats have done something for the little guy.
By contrast to the three-plus-year delay for starting the health-insurance exchanges, it took less than a year for the Medicare system to be set up from scratch and begin providing health care to seniors. By piggybacking the public option onto the existing Medicare program, the new reform presumably could be put in place even faster.
If that happened, the Democrats might risk sticker shock over the program’s 10-year cost, which President Barack Obama wants to keep at about $900 billion and which could rise by several hundred billion dollars if the start-up was advanced by three years.
But putting a new system in place quickly would address what Obama and other Democrats have called a crisis in health care. It could spare hundreds of thousands of Americans from the devastation of medical bankruptcies and/or untreated illnesses that can lead to premature death.
The medical definition of “crisis” is the point in a serious disease at which a decisive change occurs that can lead to either recovery or death. It is not a moment that calls for a three-plus-year delay.
Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to Amazon.com.
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