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New Bill Would Raise Rates, Says Insurance Group
Report Issued Before Key Committee Vote

By Ceci Connolly
Washington Post Staff Writer
Monday, October 12, 2009

After months of collaboration on President Obama's attempt to overhaul the nation's health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.

The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year's health-care reform drama.

Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.

Administration officials, who spent much of the spring and summer wooing the insurers, questioned the timing and authorship of the report, which was paid for by America's Health Insurance Plans (AHIP), an industry trade group.

"Those guys specialize in tax shelters," said Nancy-Ann DeParle, director of the White House Office of Health Reform. "Clearly this is not their area of expertise."

At the same time, White House officials were forced to retreat from plans to tout Republican endorsements of Obama's top domestic policy initiative. White House Chief of Staff Rahm Emanuel instructed the Democratic National Committee on Sunday to withdraw a pro-reform television commercial featuring former Senate Republican leader Robert J. Dole, after he objected that his words were being used for partisan purposes.

The developments came as administration officials were beginning to boast of fresh momentum in the drive to remake the nation's $2.4 trillion health sector. Senate Finance Committee Chairman Max Baucus (D-Mont.) has expressed confidence he has the votes to pass his 10-year, $829 billion legislation out of committee on Tuesday, enabling party leaders to prepare a final bill for floor debate.

"What's remarkable is not that we've had a spirited debate about health insurance reform, but the unprecedented consensus that has come together behind it," Obama said in his weekly radio and video address.

The frontal assault, though not unexpected, was an illustration of the challenges that lie ahead as the president attempts to deliver the sort of health-care overhaul that has eluded his predecessors for decades. Though open to dispute, the analysis is certain to raise questions about whether Obama can deliver on his twin promises of extending coverage to millions of uninsured Americans while also curbing skyrocketing health-care costs.

Early in his quest, Obama wooed industry leaders in the hopes of neutralizing many of the players who helped defeat a similar effort by President Bill Clinton. Yet as the process has moved from high-minded concepts to legislative details, the tension has mounted. Hospitals and doctors have increasingly grumbled that the administration is not keeping bargains it struck over how many Americans would be covered under reform and what payment changes would be made.

But no industry has reacted with the same intensity as the insurance lobby.

"The report makes clear that several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system," Karen Ignagni, AHIP's president and chief executive, wrote to board members Sunday. "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."

At the heart of the argument is whether the Finance Committee bill does enough to draw young, healthy people into the insurance risk pool. By postponing and reducing penalties on people who do not sign up for health insurance, industry analysts predict it would attract less-healthy patients who would drive up costs.

"Market reform enacted in the absence of universal coverage will increase costs dramatically for many who are currently insured by creating a powerful incentive for people to wait until they are sick to purchase coverage," the authors of the report wrote.

The analysis also examined three other provisions of the bill scheduled for a committee vote Tuesday: a new tax on high-priced "Cadillac" policies, spending reductions in the Medicare and Medicaid programs, and billions in new fees that would be imposed on the health sector.

On Sunday, Democrats blasted the industry's decision to release the report.

"Now that health-care reform grows ever closer, these health insurers are breaking out the same, tired playbook of deception to prevent millions of Americans from getting the affordable, accessible care they need," said Finance Committee spokesman Scott Mulhauser. "It's a health insurance company hatchet job, plain and simple."

DeParle and Mulhauser said the study overlooks key elements of the bill, such as a $25 billion reinsurance fund to buffer the industry from heavy losses and a provision that allows consumers to keep the insurance they have with limits on premiums increases.

Last week, the nonpartisan Congressional Budget Office released a preliminary estimate that the legislation would reduce the federal deficit by $81 billion by 2019 and would probably extend coverage to 29 million Americans who currently lack insurance. That would leave about 25 million people in the country without coverage.

Enrolling millions of people in a new insurance marketplace known as an exchange, tightening regulations on insurers and providing tax credits to millions of Americans should all lower costs, DeParle said. Contrary to the insurance industry's projections, she said, she expects growth in insurance rates to be slower than anticipated if reform is enacted.

In an effort to lend the health-care reform push a bipartisan tint, the White House has orchestrated a series of announcements by prominent Republicans hailing the importance of enacting legislation this year. But Dole, in an interview with ABC News, complained that the Democratic National Committee misinterpreted his comment that "we've got to do something."

Spokesmen for the party and the White House confirmed Sunday that the spots would be withdrawn.

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