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Michael J. Wilson

Michael J. Wilson

Posted: October 16, 2009 12:38 PM

Insurance Companies Want Caviar on the Gravy Train

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Insurance companies have been playing nice on health care reform. If you sell a product, and the government requires every American to buy it -- even subsidizes the cost for people who can't afford it -- what's not to love?

On October 13, the Senate Finance Committee, chaired by Max Baucus (D-MT) finally unveiled its health care reform bill. As with all proposed reform bills, insurers could no longer refuse to cover people on the basis of pre-existing conditions. But Baucus would provide no public program to compete with private insurance companies and deter them from raising premiums. The insurance companies would get 22 million new paying customers, 18 million of whose premiums would be subsidized, but not sufficiently enough to make out-of-pocket costs really affordable.

So why did the Health Insurance Association of America (HIAA) suddenly return to its Harry & Louise mode and oppose the Baucus bill? Care for their bottom line, of course. HIAA claims companies would raise premiums more than the Committee and Congressional Budget Office (CBO) estimate, and well they might with nothing in the bill to stop them. The Baucus bill is estimated to leave 25 million Americans without insurance, who would be required to pay a $750 penalty -- a pittance compared to an estimated $14,700 to pay for a low-cost insurance plan.

The insurance companies figure that it's young, healthy people -- the kind they love to cover -- who would opt not to buy insurance. (Of course, a small percentage of those who choose not to buy insurance will get seriously ill, and to their sorrow will regret their choice.) So the industry isn't satisfied with being handed 22 million new paying customers who might get sick. In fact, the insurance industry is just fulfilling its duty to its stockholders. They want a reform program in which absolutely everyone must buy their costly product, with hefty subsidies for everyone who can't afford the premiums (excluding those in Medicaid and Medicare). If 25 million young and healthy Americans can opt out, while the companies must insure those sick people they have heretofore spurned, the Baucus bill fails to provide the gravy train they've been bargaining for.

In truth, I don't like the Baucus bill either. HIAA and I both want everyone insured, but on different terms. Without a public option nothing will stop premiums from rising, requiring taxpayers to foot the bill for subsidies that ought to make premiums affordable (but don't under the Baucus bill). For example, according to the CBO, using current premium estimates (that HIAA thinks are unrealistically low), the Baucus bill would require a middle-income family of four with an annual income of $78,000 to pay $15,100 out of pocket (premiums, deductibles, and co-payments), or 19% of its income. (Sometimes it seems legislators have difficulty putting themselves in the shoes of a family trying to house, feed, clothe, and educate its members on $78,000, minus $15,000 for health care.)

The Finance Committee has opted to save money by leaving 25 million Americans out, and by providing subsidies far too meager to pay for expensive health insurance. HIAA insists that those 25 million healthy Americans must buy their product. Both Baucus and HIAA fall far short of my goal of affordable comprehensive health care for all Americans.

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