Insurance Dispute Heats Up Before Vote
Industry Group, White House Spar Over Premiums

By Ceci Connolly
Washington Post Staff Writer
Tuesday, October 13, 2009

Tensions between the White House and insurers exploded into open warfare Monday, with the two sides arguing over what the financial impact of comprehensive health-care legislation moving through Congress would be for average Americans.

As the Senate Finance Committee prepared to vote Tuesday on a 10-year, $829 billion bill, the insurance lobby warned that under the legislation insurance premiums could rise faster and higher than projected.

The Obama administration said the industry analysis was deeply flawed, and its allies lambasted the industry for hypocrisy and an "11th-hour attack" intended to rob President Obama of a victory on his top domestic priority.

"Health insurance companies have been laughing all the way to the bank for generations while people suffer," said Sen. John D. Rockefeller IV (D-W.Va.) "The industry stands today as the greatest impediment to real health-care reform."

The back-and-forth was reminiscent of the health-care debate of 1994, when insurers and other industry leaders helped defeat a similar effort by President Bill Clinton. On Monday, Obama advisers resurrected a report projecting similar premium increases that the industry lobby issued at the height of the Clinton-era debate to argue that the latest analysis is more of the "same old, same old" attacks.

Until now, Obama had succeeded in keeping most of the major interest groups at the bargaining table with the lure of up to 50 million new customers. But insurers have grown increasingly critical of the Finance bill, saying it does not do enough to bring healthy young people into insurance risk pools.

Although the bill would require every American to carry insurance, the committee approved changes that would postpone and reduce penalties on people who do not meet the requirement. The insurance lobby, armed with an analysis by PricewaterhouseCoopers, said that as a result, older, less-healthy patients would be more likely to buy insurance and drive up total costs.

White House budget chief Peter Orszag, citing estimates by the Congressional Budget Office, said that a new insurance marketplace, dubbed an exchange, could attract 22 million customers by 2015.

"It's hard to see how that doesn't provide adequate risk pooling and scaling," he said in an interview Monday.

Nancy-Ann DeParle, director of the White House Office of Health Reform, said the industry study overlooked other provisions of the bill that should ease premium increases. She said tax credits for small businesses and working-class families would help make insurance affordable.

Provisions that allow people to keep the insurance they have and a lower-priced plan for "young invincibles" should also hold down costs, she said.

Karen Ignagni, head of America's Health Insurance Plans, the trade group that released the report, stood by its findings. The CBO estimated that the Finance bill would cover 94 percent of legal residents by 2019, but Ignagni said insurers prefer coverage levels in the "high 90s."

PricewaterhouseCoopers predicted that new industry fees, reductions in Medicare growth and taxes on high-priced "Cadillac" policies would be costs passed on to consumers.

Orszag disputed that notion, arguing that the market will respond to those pressures by developing more affordable products.

"Almost every economist believes the effect of the Cadillac provision would be to reduce premiums over time by leading to more efficient insurance plans," he said.

Over time, a reduction in health-care spending should lead to higher wages, Orszag added.

As analysts debated the long-term effects of legislation that would restructure one-sixth of the economy, Obama's political supporters moved quickly to discredit the insurers.

Ron Pollack, executive director of the pro-reform group Families USA, said the industry report "gives hypocrisy a bad name. . . . They are like a poker player who complains about his hand when, in fact, he is the dealer."

© 2009 The Washington Post Company