This morning America's Health Insurance Plans (AHIP), the health insurance companies' lobbying operation, released a study it commissioned in an attempt to confuse the debate around health reform. Linda Douglass of the White House Health Reform Office didn't mince words in her reaction:
"It comes on the eve of a vote that will reduce the industry's profits," Douglass told TPMDC. "It is hard to take it seriously. The analysis completely ignores critical policies will lower costs for those who have insurance, expand coverage and provide affordable health insurance options to millions of Americans who are priced out of today's health insurance market or are locked out by unfair insurance company practices."
Here's an extended Reality Check to set the record straight:
AHIP CLAIM: Health reform will cause health care premiums to rise faster than they would under the current system.
REALITY: The Congressional Budget Office and other analysts confirm that the current Senate Finance Committee (SFC) health reform proposal will lower health care premiums in the exchange and make health insurance more affordable for families. AHIP’s study reaches its flawed conclusion for at least three reasons:
· Selective analysis: the AHIP study picks and chooses which policies to consider, ignoring the full benefits of the SFC proposal. For example the AHIP analysis completely ignores:
o Grandfather policy that assures that if you like the plan you have, you can keep it.
o Special policies for young adults, who AHIP claims will be hit hard, including premium credits and the choice of a special "young invincibles" plan that has a low premium.
o Reinsurance and risk-adjustment policies proven to ensure that no single group bears unexpectedly high costs.
· Ignores historic investments in lowering premiums: In addition to cherry-picking policies to analyze, the AHIP study ignores the fact that the SFC reform proposal would provide tax credits to make health insurance affordable and help reduce the current $1,000 hidden tax imposed on families with coverage by those who seek care in emergency rooms.
o Eighty-five percent of people obtaining health insurance in the exchange would be eligible for new tax credits to make health insurance affordable. In addition, their out-of-pocket expenses on health would be capped. The AHIP analysis completely ignores the impact of these tax credits and cost-sharing protections.
· Does not take into account other policies to bend the cost curve – including ones that the consultant AHIP paid to produce this study has recommended to reduce costs.
Pricewaterhouse Coopers itself has published reports confirming that investments like those in the SFC proposal – including in prevention
and in reducing waste
– will help bend the long-term health cost curve.
AHIP CLAIM: Taxes on the highest cost health plans – so called "Cadillac" plans – will raise the cost of employer-based coverage. This is the single largest driver of AHIP’s assumed $4,000 premium increase in the large group market.
REALITY: The majority of health economists from all parts of the political spectrum have arrived at precisely the opposite conclusion — a tax on insurers that provide the highest cost health plans will contribute to lowering premiums. Even AHIP’s study acknowledges that insurers are like to lower premiums in response to this tax change.
· The AHIP study acknowledges that the impact of this plan will be for insurers to reduce premiums by creating more efficient plans. The report states: "we expect employers to respond to the tax by restructuring their benefits to avoid it." However, the study then assumes away this conclusion in its analysis.
· In addition, the AHIP study reaches its conclusion by assuming that the assessment provision will apply to some of the lowest cost "bronze" plans by 2016. This is at odds with the facts. In fact, premium data from the Congressional Budget Office suggest that the Bronze plan premium will be at half the Cadillac tax cap level in 2016.
AHIP CLAIM: The failure to enact an individual responsibility requirement will increase costs in the individual market by creating an incentive for people to wait until they are sick to purchase coverage. This is the single largest driver of AHIP’s assumed 49% premium increase in the individual market.
REALITY: AHIP incorrectly downplays the responsibility requirement in the SFC proposal, which, in the context of comprehensive reform, will increase coverage by providing an incentive for the uninsured to enter the system.
The Congressional Budget Office estimates that under the amended SFC proposal, by 2014, 15 million people will enter the exchanges, and by 2015, 22 million will enter, enabling adequate risk pooling and minimizing the adverse selection that the AHIP analysis assumes.
The Congressional Budget Office reached this conclusion because "the proposed mandate and subsidies would lead many people who would be uninsured under current law to obtain coverage in the exchanges."
AHIP CLAIM: Reductions in Medicare spending will raise costs for families. Part of the premium increases that the AHIP analysis assumes stems from "provider payment cuts" in Medicare and Medicaid, leading to cost-shifting onto private plans.
REALITY: Health insurance reform will strengthen Medicare. Once again, the assumptions in the AHIP analysis are not consistent with the facts of the bill that they are analyzing.
· The overwhelming majority of savings in Medicare from the SFC reform proposal comes from reducing fraud and abuse, decreasing overpayments to Medicare Advantage plans, and other policies recommended by experts such as the Medicare Payment Advisory Commission. In fact, many of the industries affected recommended these levels of savings as responsible and necessary for health reform.
· AHIP also assumes that a public option would exist that would pay lower than private rates. The Finance proposal does not include a public option, and the Senate HELP version would negotiate rates rather than fix them, as suggested in the analysis.
AHIP CLAIM: Fees on health insurance providers, pharmaceutical manufactures and device makers will be passed through to individuals and families.
REALITY: This claim does not withstand scrutiny for at least three reasons:
· First, the idea that every dollar of assessment will be passed on to consumers is not credible – especially given the policy design. The policy assesses a flat amount per year, paid by companies based on their market share, beginning in 2010. The AHIP assumption that they will accumulate the amount of these fees and pass them along in a lump sum to enrollees later simply does not make sense.
· Second, these fees are intended to recapture part of the benefits these businesses will get from reform. No one disputes that newly insuring nearly 30 million more Americans will increase their access to needed services – translating into new business for insurers, drug companies and device makers and other providers. This new revenue would far exceed the amount of the new fees – so if you believe that they will pass along the new assessment, they will also pass along their new windfall to consumers.
· Third, the fees help improve and expand coverage and thus reduce the $1,000 hidden tax tens of millions of Americans pay for the uncompensated care of the uninsured. Even if you believed that somehow companies would find a way to pass the fees along, they would be more than outweighed by the benefits middle-class families would get from not only hundreds of billions of dollars in health care tax credits but from reducing the hidden tax they currently pay for the uninsured.