New Report Raises Specter of Higher Costs Under Finance Panel Bill

As the Senate Finance Committee prepares to vote on its health reform legislation today, the Obama administration and Democrats are on the defense after a new study from America's Health Insurance Plans says the bill would increase premiums dramatically, the New York Times reports (Pear/Herszenhorn, New York Times, 10/13).

AHIP sent the study, by accounting firm PricewaterhouseCoopers, to its members on Sunday (Alonso-Zaldivar, AP/Chicago Tribune, 10/12).

The release of the study follows a positive turn for the legislation, which was scored by the Congressional Budget Office last week and found to provide health coverage to 94% of U.S. residents and reduce the federal budget deficit by $81 billion over 10 years.

The study shows "the challenges that lie ahead as [President Obama] attempts to deliver the sort of health care overhaul that has eluded his predecessors for decades," the Washington Post reports. The administration had sought to neutralize attacks from care providers, insurers, drugmakers and other industry players after those groups defeated President Clinton's health care effort in the 1990s (Connolly, Washington Post, 10/12).

Robert Blendon, a health policy pollster and political analyst at Harvard University, said he does not believe the study is a "bill-stopper," adding, "The momentum is way too far (in favor of passing a reform bill), and there is a sense that something has to be done."

However, Blendon added that the report could add to consumers' concerns that reform will not improve the health system (Budoff Brown, Politico, 10/12).

Report Details

The AHIP report found that the average cost of family coverage will rise from $12,300 to $18,400 in 2016 under current law but would increase to $21,300 by 2016 if the Finance Committee bill is adopted and the majority of its proposals take effect in 2013.

According to the report, the cost of individual coverage will increase from $4,600 to $6,900 under current law but would increase to $7,900 under the Finance Committee bill (Pear, New York Times, 10/12).

AHIP President and CEO Karen Ignagni said, "Between 2010 and 2019, the cumulative increases in the cost of a typical family policy under this reform proposal will be approximately $20,700 more than it would be under the current system" (Washington Post, 10/12).

Ignagni and PwC said several provisions in the Finance Committee bill would increase insurance premiums, including:

• A requirement that would not permit insurance companies to deny coverage based on pre-existing conditions;
• A measure that would prohibit insurance companies from considering an individual's health status when setting rates; and
• Modest penalties for individuals who do not purchase health insurance.

Proposals to tax high-cost insurance plans and place new fees on insurance companies would force insurers to pass these costs on to their customers in the form of higher premiums, according to the study.

In addition, the study said the bill would cut hundreds of billions of dollars from Medicare, forcing hospitals and other health providers to make up for such cutbacks by increasing charges to private insurers, which in turn would pass the costs to businesses, families and individuals (New York Times, 10/12).

In a statement issued late Monday, PwC said its research only examined four provisions in the Finance Committee legislation. The firm did not back away from the conclusions in the study but said, "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" (Alonso-Zaldivar, AP/Atlanta Journal-Constitution, 10/13).

Democrats Criticize Methodology

White House spokesperson Reid Cherlin said, "This is a distorted and flawed report from the insurance industry and cannot be taken seriously. This so-called analysis appears on the eve of a vote that may eat into the insurance industry's profits. It conveniently ignores policies that will lower costs for those who have insurance, expand coverage and provide affordable insurance options to millions of Americans" (New York Times, 10/13).

Nancy-Ann DeParle, director of the White House Office of Health Reform, dismissed PwC as a reliable source, saying, "Those guys specialize in tax shelters," adding, "Clearly, this is not their area of expertise" (Washington Post, 10/12).

Finance Committee spokesperson Scott Mulhauser said the study failed to account for the legislation's proposals to lower the cost of coverage, such as tax credits (AP/Chicago Tribune, 10/12). He added, "This report is untrue, disingenuous and bought and paid for by the same health insurance companies that have been gouging consumers for too long. Now that health care reform grows ever closer, these health insurers are breaking out the same, tired playbook of deception. It's a health insurance company hatchet job, plain and simple" (Warner, "NewsHour with Jim Lehrer," PBS, 10/12).

Republicans Say Report Confirms Their Concerns

Senate Minority Leader Mitch McConnell (R-Ky.) said, "Higher premiums, higher taxes, and more government -- that's not reform. But that's precisely what the American people, the Congressional Budget Office and now outside experts have identified with this trillion-dollar experiment that cuts Medicare, raises taxes and premiums and threatens the health care options that millions of Americans enjoy" (Politico, 10/12).