FACT CHECKER Health Insurance Industry Reports

Thursday, October 15, 2009

Health insurers released two reports this week warning that the reform legislation passed by the Senate Finance Committee would result in soaring premiums.

Both reports -- by PricewaterhouseCoopers for America's Health Insurance Plans and by Oliver Wyman for Blue Cross Blue Shield -- predict premium increases of $3,000 to $4,000 per year for the typical family without employer-based coverage. The finance panel's bill "would have the unintended consequence of increasing premiums and making coverage unaffordable for millions of people," the Blues' chief executive, Scott Serota, wrote in a letter to Congress attached to his group's report.

The White House and congressional Democrats have dismissed both reports as slanted, last-minute attempts to block the legislation. "How many fatally flawed insurance company 'reports' do insurance companies need before their credibility is entirely shot?" said Finance Committee spokesman Scott Mulhauser.

Here is a summary of the insurance industry claims, coupled with a vetting of them by Washington Post staff writer Alec MacGillis:

The Individual Mandate

Both reports argue that, because the bill weakened the annual penalty for people who do not obtain health insurance, many young, healthy people would opt to pay rather than get covered. This would result in a concentration of older and sicker people without employer-based coverage buying plans, thus driving up premiums for those people.

Analysis: There is a lively debate about whether the penalty would goad healthier people to get coverage. But the reports are probably too pessimistic. Massachusetts has gotten all but 3 percent of residents into coverage with a penalty of roughly the same size. The reports also do not take into account the draw of the low-cost "young invincibles" policy included in the bill. And the Congressional Budget Office estimates coverage levels would rise to 94 percent of Americans, from 83 percent.

New Regulations on Insurance Plans

Both reports argue that new insurance requirements would also push up premiums. Insurers would no longer be able to deny coverage based on preexisting coverage, would have to limit how much they charge based on age, and would have to meet minimum standards for the quality of the coverage offered.

Analysis: There is no question that consumers in loosely regulated states now buy bare-bones policies that would not meet the new standards. But the reports underestimate the market power that individuals without employer-based coverage and small businesses would enjoy as a result of being pooled together for coverage, instead of buying on their own in highly uncompetitive markets, as they do today. In addition, small businesses already enjoy protection against denial of coverage, so that rule would not represent a change for them.

Soaring Cost in Particular States

The Blues report argues that premiums for those without employer-based coverage would soar most in certain parts of the country, where states loosely regulate the kind of plans that insurers can offer different sorts of consumers. Premiums, it predicts, would increase the least in the Northeast and the most in the South, Mountain West and Southwest.

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