Baucus Health Care Legislation Advances

Published November 3, 2009

Rifts are emerging in the coalition of support for health care reform in the wake of a 14-9 vote by the Senate Finance Committee to send reform legislation to the Senate floor.

Two studies by leading nonpartisan firms indicate President Barack Obama’s health care agenda could have negative ramifications both for insurers and the insured, complicating matters for the White House’s fragile political coalition.

One study was conducted by PricewaterhouseCoopers (PWC) for the America’s Health Insurance Plans (AHIP) trade association, the other by Oliver Wyman Inc. for the Blue Cross Blue Shield Association (BCBSA). Together they show Sen. Max Baucus’s (D-MT) health reform legislation could result in higher prices and less flexibility for the insured.

Higher Premiums Expected

“The PWC report correctly notes that the Baucus bill would impose tremendous financial hardships on many middle-class Americans by forcing them to purchase expensive state-mandated insurance on terms set by the politicians,” said Paul M. Hsieh, M.D., cofounder of Freedom and Individual Rights in Medicine in Denver, Colorado.

The BCBSA report concludes premiums would rise as much as 50 percent for individuals and 19 percent for small group plans under current reform proposals, which include weakened forms of the individual mandate.

“Requiring insurers to guarantee they will issue coverage regardless of preexisting conditions—without an effective mandate—means that people can wait to purchase coverage until they need it, causing premiums to increase for most new purchasers,” the BCBSA study said.

At Table, But on Menu

One Capitol Hill insider, a senior health policy staffer on the Senate side who requested to remain anonymous, offered his explanation for why the health care industry is suddenly realizing the potential harm in the reform package.

“Through a combination of backslapping and arm-twisting, the White House cobbled together a fragile coalition of industry and insurers to support ‘health reform,'” the staffer said. “Industry and insurers convinced themselves being at the table meant they would not be on the menu. But as the rhetoric evolved to policy reality, supporters of ‘reform’ are now scrambling.”

Hsieh believes insurers ultimately will regret not fighting the reform package by arguing for market freedom.

“Earlier this spring the insurance industry could have taken a principled stand in favor of genuine free-market reforms, such as repealing laws banning sales across state lines as well as laws mandating guaranteed issue and community rating,” Hsieh said.

“Such reforms could have greatly reduced insurance costs for millions of Americans currently priced out of the market,” Hsieh continued. “Instead, they chose to make a deal with the devil and accept new regulations requiring them to cover everyone regardless of preexisting conditions, in exchange for a Massachusetts-like individual mandate.”

May Rue Earlier Support

The Senate staffer believes the impact of reform will be profoundly negative for insurers and that rising costs will be passed to the consumer.

“Republicans who attempted to engage industry this spring in pushing back a government takeover of health care were met with pleasantries and cool distance,” said the staffer. “Now industry and insurers are finally realizing just how painful ‘reform’—meaning taxes and regulation—would be for them.”

Rep. John Shadegg (R-AZ) says the proposed health care overhaul will increase premium costs, decrease choice, and increase the federal government’s control.

“For the average American this isn’t about money; it’s about their family’s health care,” Shadegg said on a conference call with journalists. “They are going to lose much of what they have, doctors and plans, once this gets passed.”

For insurers and the American people, Hsieh believes it may be too little, too late.

“The insurance industry’s current objections, although correct, may strike many as a cynical, last-minute attempt to torpedo a deal they now realize is harmful to their bottom line,” Hsieh said. “Their current objections would carry much more weight if they had taken a consistent pro-free market stance from the outset.”

Ben Domenech ([email protected]) is managing editor of Health Care News.

For more information …

“Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage,” PricewaterhouseCoopers:

“Insurance Reforms Must Include a Strong Individual Mandate and Other Key Provisions to Ensure Affordability,” Oliver Wyman: