The House dubbed its new health insurance reform bill the Affordable Health Care for America Act.
For insurance executives, though, calling the 1,990-page, $1 trillion act “affordable” is, well, ironic. Sort of like nicknaming a 400-pound Teamster “Tiny,” or calling an aggressive Rottweiler “Fluffy.”
That’s because the myriad proposals before Congress actually would increase the cost of coverage for most Americans, they say.
After studying various reform proposals and weighing them against current coverage levels, Anthem Blue Cross Blue Shield is the latest insurance group to make the cost-busting argument.
The WellPoint-owned company did find in its studies that premiums for some of the 300,000 Nevadans it insures would decrease. Older, unhealthier residents in particular would see price breaks. But those smaller costs would come from bans on charging high-risk patients bigger premiums; and younger, healthier consumers would pay as much as 115 percent more in premiums to finance those prohibitions. On average, Nevadans buying individual coverage through Anthem would see premiums rise by 85 percent, the company found. Among small businesses, 70 percent would see premium gains under existing reform proposals.
Other health industry observers dispute Anthem’s findings.
“I think these numbers stink like a week-old fish at the market. They’re absolutely absurd,” said Launce Rake, a spokesman for the Progressive Leadership Alliance of Nevada, which has affiliated with Health Care for America Now to promote fixes such as a government-run insurance option and caps on out-of-pocket expenses. “These numbers are a threat. I just don’t trust any of their numbers, because they are not objective. They are spinning it as much as they can.”
Anthem executives counter that there is little spin in their analysis. Rather, they crunched some basic data using middle-of-the-road assumptions from several proposals before Congress.
CALCULATING HIGHER COSTS
Here’s how they arrived at their conclusion: Anthem’s starting point was a 25-year-old male in peak health, purchasing the company’s SmartSense policy, an individual plan with a $2,500 deductible and comprehensive pharmaceutical coverage.
Today, a healthy, young man shells out a premium of $119 a month for SmartSense. But two key congressional proposals could, by themselves, push up that premium substantially.
First is a law against denying consumers coverage based on pre-existing conditions. Second is a weakened mandate that doesn’t force Americans to buy insurance.
Anthem and other insurers contend that if Congress forbids denial of coverage for pre-existing conditions at the same time it softens individual insurance mandates, then healthy people could opt out of coverage until the day they’re diagnosed with a catastrophic illness. That would burden insurers with a pool of ailing customers, and fewer healthy clients to defray the expenses of acute care.
Those twin reforms would boost that $119 SmartSense premium by 50 percent, to $179, said Mike Murphy, president of Anthem’s Nevada operation.
Congressional proposals would limit discounts based on age and gender as well. Younger people and men pay less for health insurance because they use less health care than seniors and women. Under the new rules, those price cuts would disappear. Congress also is set to require that insurers provide only plans that cover at least 70 percent of what actuarial tables say a typical person’s health care will cost in a year. Right now, that SmartSense plan covers 58 percent of the costs a 25-year-old man might incur in a year.
Congress also has proposed an annual $6.7 billion tax on health insurers, as well as taxes on prescription drugs and medical devices ranging from breast-milk pumps to pacemakers. Businesses will pass those taxes on to consumers, Murphy said.
The grand total, post-reform? Nearly $260 a month, up 115 percent from today’s $119.
Anthem officials say a family of four with two 40-year-old adults in average health, plus two kids, would pay 61 percent more, with monthly premiums jumping from $674 to $1,088.
But thanks to those proscriptions on charging for age, gender and health status, a 60-year-old couple in poor health would see monthly premiums drop 11 percent, from $1,741 to $1,558.
Anthem’s study concluded that most small businesses would pay more as well. Using a preferred-provider option (PPO) plan with a $500 deductible, a company with a healthy, young staff of eight would pay 108 percent more in monthly premiums. Small companies with work forces in middling health would pay 16 percent more, while smaller businesses with unhealthy employees would experience a premium drop of 26 percent.
It’s not the first time members of the health insurance industry have questioned the cost of reform. Industry trade group America’s Health Insurance Plans released an Oct. 11 report showing that legislation could add $1,700 a year to the cost of family coverage in 2013, and $4,000 by 2019.
And Tennessee-based Humana sent letters in September to its Medicare customers alerting them to benefit cuts that might result from reform.
Nevada’s largest insurer, UnitedHealthcare, doesn’t comment on competitors’ studies, but spokesman Peter O’Neill said current reform proposals carry “great flexibility.”
AN EMPTY THREAT?
Rake’s response to insurers lamenting potential costs? Premiums have skyrocketed even without insurance reform, so he doesn’t buy the idea that private coverage will remain more affordable if Congress does nothing.
Rake pointed to a recent Kaiser Family Foundation study revealing that insurance premiums grew by 131 percent in the last decade, while wages rose 38 percent and inflation came in at 28 percent. If premiums continue to jump by their averages of the last 10 years, then a family policy will cost $30,803 by 2019, Kaiser reported.
Nor does Rake believe Americans would choose to go without insurance until they got sick.
“The reason people don’t sign up now is because it’s not affordable, and it’s not affordable because the health insurance industry has made a very cold calculation that it’s better to charge a lot of money than it is to actually offer their services to a lot of people,” he said. “I think if people have access to affordable insurance, they will sign up for it.”
Anthem’s numbers are nothing more than a scare tactic, Rake added.
“They are threatening the American population with huge increases. But if we don’t pass insurance reform, they’ll raise their premiums anyway,” he said. “The health insurance industry is saying, ‘We’re going to get you. We’re going to raise premiums through the roof as punishment for passing health care reform.’ This is exactly why we need a public option. They are making the argument for me.”
But a public option would only heighten premium spikes, Murphy said. Government insurance programs, such as Medicare and Medicaid, reimburse doctors and hospitals as much as 30 percent less than private insurers pay, according to a study from the Lewin Group, a UnitedHealth consulting subsidiary. Providers make up the lost reimbursement by charging commercial insurers for the difference.
A report from benefits consultant Milliman Inc. found that cost-shifting from public to private insurance adds 15 percent to private insurers’ costs. Put millions of Americans in a new government program that will likely have lower reimbursements like its federal cousins, and cost-shifting to the privately insured will intensify, Murphy said.
Murphy acknowledged that federal premium subsidies would help needy Nevadans afford pricier insurance.
A 25-year-old male who earns the federal poverty wage of $10,830 a year for a single person or $22,050 for a family of four would receive a 90 percent subsidy, so his SmartSense plan actually would cost just $26 post-reform. But those subsidies stop covering premium gains once consumers make 250 percent of the poverty wage. That’s $27,075 for individuals and $55,125 for families of four.
More important, the bigger problem with subsidies is that they don’t reduce overall costs, Murphy said. They merely reduce out-of-pocket expenses for the poor. That means someone else must make up the difference that subsidized patients aren’t paying.
Who will pay? Healthy consumers, high earners and even middle-class taxpayers, as some of those uncovered costs end up rolled into the federal deficit, Murphy said.
“There are many funding mechanisms underlying these bills. But the reality is, we don’t believe the proposal on the table can be funded,” Murphy said. “You can challenge some of the assumptions, but the underlying economics show that the proposed system is going to cost dollars, and those dollars have to come from somewhere. The question is, how are these things going to be paid for when people are making assumptions that these reforms aren’t going to cost any dollars?”
Rake has a solution: Carve some financing out of insurers’ profits and overhead. Insurers report profits averaging just 3 percent, but that’s because they fold stock market losses into their earnings analyses, he said. As long as insurance companies pay their chief executive officers high salaries — Ron Williams of Aetna made $24.3 million a year, while WellPoint’s Angela Braly made $9.8 million — they can afford to help consumers more, Rake said.
“They certainly could absorb costs much more than they do now. They are swimming in gravy.”
Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512.