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The Senate Finance Health Bill Has No Clothes

Capt8d18e54acb3f47b0b1e8a46ae61a1980health_care_overhaul_dchh103 Readers of this blog know that I have lots of concerns for the Senate
Finance health bill primarily because it does not so much represent
health care reform as just an expensive entitlement expansion.Readers also know the insurance lobby–AHP–is not one of my favorite organizations.But
I will tell you the report by Pricewaterhouse Coopers (PwC)
commissioned by the AHP and released this morning is accurate. The
Senate Finance bill would do nothing short of blowing up the insurance
market.You don't need to be Einstein or a PwC actuary to come to that conclusion. Common sense is all the credential you need.

Beginning
in 2013, the Senate Finance bill would make uninsured individuals
eligible for premium credits to buy a health policy. But those credits
would leave these people far short of being able to really afford a
health insurance policy. A family of four at 250% of poverty and making
$55,000 a year ($52,000 is the medium household income in the U.S.)
would have to pay about $4,000 toward their premiums and that for a
policy with a $1,000 deductible and a maximum of about $7,000 in
out-of-pocket costs each year.At 300% of poverty, $66,150, a family would be required to pay $8,000 in premium for a policy with a $3,000 deductible!How
many families making $55,000 a year or $66,000 a year do you know that
could add this kind of expense to their annual budgets?It is
really no better for a family making 400% of poverty, or $88,200 a
year. They would have to pay $10,600 a year in insurance premiums for
that policy with a $3,000 deductible!Senate Finance, knowing
they could not enforce this kind of individual mandate to buy health
insurance then set about to exempt many from paying a fine or just
gutting the fine if they did not buy the coverage.In 2013, for
example, there would be no fine for not having insurance. By 2014 the
penalty would be $200 per adult and it would rise to $400 in 2015, $600
in 2016, and $750 by 2017.But starting in 2013 the Senate
Finance bill says that the insurance companies have to get rid of
medical underwriting and pre-existing conditions provisions.So
in 2013, any consumer could simply go to the health insurance company
and demand to be covered under any one of the mandated benefit plans.
No medical underwriting before getting in and no pre-existing condition
limitations. Just sign the application and go to the doctor.In
one sense you can understand the political logic here–the Democrats
can't very well mandate middle class families to pony-up $4,000, or
$8,000, or $10,000 out of their already challenged budgets. So they
just found a way to exempt them or make the fine a tiny one.But they left the insurance reforms in place.Let me ask you a question. Why would any family buy health insurance under such a scheme?I
will suggest the answer is that they will buy it when they need it. No
sooner. Even in 2017, a family with two adults would pay no more than a
$1,500 annual fine against a premium that would be $4,000 to $10,000 a
year in these middle class income brackets.I'll give you another one. Why would any small employer provide health insurance?I
will suggest the answer to that one is the smart small employer will
just cash-out any benefits they do provide today and tell the employee
t0 pay the fine until they need it and then go to the exchange and get
it (there is also no small employer mandate in the bill to provide
coverage). The worker would likely be thousands of dollars ahead each
year!The problem the Democrats have here is that they are
trying to get a health bill to cost under $1 trillion. That has made
them back off on premium subsidies and policy benefits. They have had
to back so far off that proposals are not offering health insurance
policies anything close to being affordable for middle class families.The political response in Senate Finance has been to waive the individual mandates but keep the underwriting reforms.The
sum of it all is a health insurance market disaster in the making. In
the business we refer to it as a "death spiral." Simply, the higher the
premiums go the fewer that will buy, the sicker the pool, the higher
the premiums go once again, even fewer people are left in the pool, and
so on until all of the sick are in the pool and all of the healthy have
left it.The PWC report says that average family premiums of
$12,300 today will rise to $25,900 under the Senate Finance proposals
in 2019. They say premiums would be driven by these underwriting
reforms, cost shifting from Medicare cuts, and new insurance taxes
simply being passed through to consumers.I don't know if the PwC report is exactly correct.But common sense certainly takes one to the same conclusion.The
Senate Finance Democrats could not have created a bigger insurance pool
train wreck in the making than the one they have devised here.

What
is really amazing is how all of these Senators sitting around that
Senate Finance table have just sleep walked their way through all of
this as if they don't have the common sense to figure this out on their
own.

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health
Policy and Marketplace Blog
, where this post first appeared.

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31 replies »

  1. i have tried gnucash in past but not a big fan [for tracking personal finance records ]. There are several online websites which offer excellent alternatives. I use buxfer.com and works great for my needs. There are other good options like quicken, mint, wesabee, etc. [buxfer worked out best for me so haven’t digged into them much]

  2. i have tried gnucash in past but not a big fan [for tracking personal finance records ]. There are several online websites which offer excellent alternatives. I use buxfer.com and works great for my needs. There are other good options like quicken, mint, wesabee, etc. [buxfer worked out best for me so haven’t digged into them much]

  3. Great list and very interesting – how about B2B based social media initiatives? – much of the financial services efforts are based on attracting interest and business from other financial institutions rather than consumers and I am yet to come across a bank using social media to acheive this ?
    anyoen got any ideas thoughts ?

  4. You’re right!
    Reid, Baucus and Pelosi sit around all day behind closed doors chanting: “La, la, la, la, la, la . . . .” It can’t be anything else because no person, much less our legislators could do so much harm in so short a time and be so ignorant of the future.
    For more details please check out my blog at http://www.lawdocblog.com
    AG, M.D,J.D

  5. Hey can anyone help me? For my class I have to write a paper about why im “for” premium subsides and arguements people would have against it then I have to write what id say back to support why im still for it. Please help.

  6. Received in my Inbox:
    * The U.S. Post Service was established in 1775 You have had 234 years to get it right and it is broke.
    * Social Security was established in 1935. You have had 74 years to get it right and it is broke.
    * Fannie Mae was established in 1938. You have had 71 years to get it right and it is broke.
    * War on Poverty started in 1964. You have had 45 years to get it right; $1 trillion of our money is confiscated each year and transferred to “the poor” and they only want more.
    * Medicare and Medicaid were established in 1965. You have had 44 years to get it right and they are broke.
    * Freddie Mac was established in 1970. You have had 39 years to get it right and it is broke.
    * The Department of Energy was created in 1977 to lessen our dependence on foreign oil. It has ballooned to 16,000 employees with a budget of $24 billion a year and we import more oil than ever before. You had 32 years to get it right and it is an abysmal failure.
    * You have FAILED in every “government service” you have shoved down our throats while overspending our tax dollars AND YOU WANT AMERICANS TO BELIEVE YOU CAN BE TRUSTED WITH A GOVERNMENT-RUN HEALTH CARE SYSTEM??
    The author left out the Energy Star Program.

  7. Insurance is the fox guarding the hen house.
    Take insurance out of my healthcare decisions. They interfere. They don’t reduce cost at all. They cause a lot of bickering about what they should and don’t cover. Paperwork is horrendous. It’s a mess hardly any lay person understands and it ends up costing us all more. How can we expect someone (Insurance) to cut costs that they are creating by their existence and for which they stand to gain? This is just stupid. (I know they employ a lot of people who would lose their jobs, and that would need attention, but that is a totally different matter, and a problem that they also created.)
    My insurance doesn’t pay for most of what I do to maintain my health and to remedy my illness. This is not my idea of Healthcare. It’s more like Health-No-Care. So, how can you IMPOSE insurance and infringe on my freedoms. I do not want to pay for Insurance at all. I personally do not want insurance. But, I also don’t want insurance to drive up the cost of treatment for those without insurance (like it is now). I do not want to pay for someone else’s poor life style or indiscretions. I want the rewards and consequences of my lifestyle to be mine. (I know there are those who are hurting and need our help. And we need to address this serious problem. But, insurance for all is not the answer. There are lots of other ways to solve this.)
    Currently I have health care insurance and they pay very little of what I determine I need for my own care. I am motivated to stay away from pills and conventional doctors and most especially hospitals. My healthcare includes Chinese Herbal medicine, Homeopathy, Visual Imaging, Physical Therapies, Vitimine therapy, and other effective forms. And these are very inexpensive and effective for me. At 65 I am healthy and taking no regular pills or medicine. I understand this to be quite a rarity these days.
    But insurance decides my practices do not qualify for their coverage- that “these are not effective.” So, I am left out- that is, I pay for insurance but cannot collect. And when insurance has great numbers (esp helped by legislation) behind them it tends to drive my healthcare practicioners out of business. What gives Insurance this right?
    In reality, the interests of Insurance, or any business, or any government, are not in the personal, nor the moral. And governments must take care to protect the minority. Even with good intentions, profit making, promotion of power and position, no one else can or should ever make my health decisions for me– not even in the name of money!
    So, I will refuse any mandated insurance and tax payers will spend their resources on enforcement of innocent citizens like me who will stand up for ourselves. I will say “show me where in the Constitution it says to be a citizen I must buy insurance.”
    Abraham Lincoln reminds us that Democracy is NOT rule by majority. It is manifested in the protection of the minority.

  8. Nate, are you actually arguing that commercial insurers keep costs down? Come on, you know that’s ridiculous.
    I personally have zero choice in my insurance company, other than quitting my job. Nice try though.
    And… why didn’t insurance companies stop covering never events a long time ago? Why did they have to wait for Medicare’s lead to do it?
    Because they don’t care about adding value or lowering costs, they only care about profits. And it’s easier to maintain profits by manipulating the political system than by actually adding value.

  9. Hey there, Nate. You seem to think that I’m actually interested in debating a bigot. I am not, despite your fantastic self-assessment of your mental “capacities” (such as they are). And as others have already pointed out the deficiencies in the PcW report, which you continue to ignore, what’s the point?
    Patterns are interesting. Indeed, the pattern in your comments is clearly discernible. Not only based on a debilitating and tedious prejudice, it is also premised on a fundamental lie – that government has ever attempted to “reform” health care – and a denial that reform cannot happen when the very entities that are the subject of that reform are in complete control of the process.

  10. Ya I get the pattern Peter, 44 years of failed government reform has lead to us having the most expensive health insurance systems in the world. The question is do you get the pattern? Do you not see every time government “reforms” healthcare it fails to deliver what they promise and increases cost?
    healthcaredev what is wrong about the study? I can and have pointed out numerous specific peices of 3200 that are wrong or wont work, all the left can do is attack the study authors and financiers but aren’t mentally capable of offering even a single substative argument against it. Get an argument then post.

  11. “name me even one good reason to go to a government plan let alone three reasons.”
    Canada(9.7%GDP), United Kingdom(8.2%GDP), France(11.1%GDP), Germany(10.7%GDP), Japan(8.2%GDP), United States(16%GDP),you get the pattern.

  12. Looks like this blog is starting to attract the crazies.
    In any case, Laz is clueless. The PwC report is gambit by the insurance industry to preserve their license to print money. A likely outcome, indeed!
    And it failed … today at least. But AHIP has done enough damage to this process already. What’s one small loss among partners in crime?
    Hey, Laz, do some journalism and give the Baucus office a call. Ask to speak with the senator’s health care advisor, Liz Fowler (she’s the dour chick sitting behind him in all the committee hearings – his controller), and if you get her on the line ask her if her tenure at Wellpoint doesn’t tend to suggest that Baucus is in the hip pocket of her [former] employer. And then ask her how often she talks with Michelle Easton.
    The only likely outcome of this pathetic charade is that real and meaningful reform will not happen so long as politics is so corrupted by special interest money. In the meantime simple people remain convinced by the voices in their heads (or those emanating from A.M. radio) that all their problems are the fault of “the scum of America” while completely missing where the ball is really getting pitched.

  13. Spike to start with efficency, ever government plan in this country has double digit fraud and abuse rates. Medicare loses more to fraud then it cost to administer oprivate insurance.
    Next freedom, if I don’t like my insurance company I can change, if I don’t like insurance I can not buy it, neither an option under government plans.
    Next innovation, it took Medicare until 2006 to cover Rx, what advances in medicine will be lost if we wait for the government plan to cathc up?
    There are three great reasons to keep private insurance over governemnt, name me even one good reason to go to a government plan let alone three reasons.

  14. The insurance-industry-funded GOP senators fought tooth and nail against any element of real reform, so what is getting through is what is possible to pass, not what is desirable. I’d say they were being hoisted on their own petard.

  15. I don’t know why anyone would trust a report commissioned by the private health insurance industry to be anything other than scare tactics. They seem to suggest that there will be a ballooning of health care (as if that’s somehow bad) by the uninsured but no competition at all in the marketplace. They may face a backlash from the left who can counter with an easy argument for the public option: our plan won’t cost you nearly as much as these private insurers would charge you.

  16. I put my real name because I want everyone to know who wrote this.
    THIS COUNTRY IS GOING IN THE GARBAGE. I PAY TAXES AND I AM TIRED OF PAYING FOR LAZY NO GOOD DRUG USERS, ALCHOLICS, AND JUST PLAIN LOSERS. I AM GOING TO QUIT MY JOB WORK FOR CASH ONLY AND PAY FOR MY INSURANCE MYSELF. THIS IS DISCUSTING. ONLY THE SCUM IN AMERICA GETS ANYTHING. WE WORK FOR WHAT HIGHER TAXES AND LESS PAY BECAUSE OBAMA THINKS EQUAL PAY FOR EQUAL WORK. WELL NO MORE WORK HERE. I WILL LIVE OFF MY SAVINGS WHICH WILL BE OUT OF RETIRENMENT FUNDS THIS WEEK AND ALSO OUT OF THE BANK. NO MORE TAXES FOR ME EXCEPT FOR PROPERTY AND SALES AND I BET THAT WILL INCREASE ANYWAY.
    GOOD LUCK ALL

  17. When the gang of four ruled China they decided to reduce the rat population by offering bounties for dead rats at village rat collection stations. What did the peasants do? They started raising rats.

  18. A. These senators are idiots.
    2. Good. Kill the private insurers, and then we’ll get real reform when the government is the payer.
    Dear American Left: talk it over and get back to us.

  19. If reform doesn’t pass, the $12,300 policy costs at least $24,200 by 2019 assuming a completely reasonable 7% annual increase in premiums. PwC’s doomsday scenario has it going up to $25,900. If premiums increase at a still somewhat reasonable rate of 8% per year, it’s $26,550. And this is assuming that NONE of the other components of the bill help to lower costs.
    Yes, the weak individual mandate causes moral hazard. It is a problem. But to me it looks like health insurers are continuing their role as helpless bystanders in the industry, forced to do this or that. They’re incapable of adding value to the system.
    Nate, you’re a big proponent of health insurance. What benefit does private insurance provide that couldn’t just as easily be provided by a government-run plan? Where is the evidence that Medicare Advantage is better than Medicare, Medicaid Managed Care is better than Medicaid, for anything other than risk management for the government? If the health insurance industry says they’ll be “forced” to double premiums in 10 years, what value are they providing anyway?

  20. “Only a liberal can stand there with a strait face and claim this won’t kill the entire industry. The only question is are liberals this stupid or this smart for finding a back door way to kill private insurance?”
    Good, kill the entire industry, then we can begin to get real reform through single-pay. Dumb or smart, it’s the right thing to do.

  21. http://www.advantagebenefits.com/forms/selfemployedshuffle.pdf
    “It detailed a friend of mine, who had bought health insurance for two months at a time over a 36 month period to have two minor surgeries.”
    There is nothing more sleazy and political then the way politicians attack insurance companies for pre-ex and waiting periods. It is 100% dishonest and completly ignores the facts on why they have to exist. You can’t have guarntee issue without a mandate to buy, it just doesn’t work and decades of history have proven it

  22. Only a liberal could come up with these plans being discussed. We don’t need the PwC study, it is already happening in MA.
    “When the merger occurred, the state told the health plans in Massachusetts that we could no longer apply a pre-ex exclusion or waiting period to individual purchasers”
    “we all hoped that the new state requirement on individuals to have health insurance – or pay a tax penalty – would encourage healthy individuals to purchase insurance every year, and offset this now wide open front door for individual coverage.”
    MA has a pathetic tax also for non complaince.
    “A few months ago, brokers started posting comments on this blog site that implied that people – and some brokers and employers – were gaming that wide open front door – purchasing health insurance for a few months at a time, using a lot of services, and then dropping their coverage. The penalty for not having coverage isn’t all that steep – about $900 – and while a few months of coverage might cost $2-3,000 in premiums”
    “The results were astonishing. Between April of 2008 and March of 2009, about 40% of the people who purchased individual insurance from Harvard Pilgrim stayed covered by us for less than 5 months. Even more amazing, they incurred, on average, about $2,400 per person in monthly medical expenses – roughly 600% higher than what we would have expected.”
    http://www.letstalkhealthcare.org/ma-health-reform/a-costly-wrinkle-in-the-merged-market/
    There is no reason to mince words, LIBERALS ARE IDIOTS. We know exactly what will happen if this passes, it is already happening and has been common knowledge for 30+ years. Only a liberal can stand there with a strait face and claim this won’t kill the entire industry. The only question is are liberals this stupid or this smart for finding a back door way to kill private insurance?
    An equally big impact is the recent GINA regualtions that outlaw Health Risk Assesments and most efforts by employers and insurers to control cost. Add the new proposed provisions of capping out of pocket and eliminating life time maximums and you can again kill off private insurance pretty quick. After bankrupting plenty of innoncent people along the way.

  23. Whose costs is everybody referring to? Is the Senate Finance bill referring to government costs or premium payers’ costs? I’ve yet to see any prediction of what premium payers will pay. Tell me what my premiums (and taxes) will be. The insurance industry is clearly saying premium payers will pay more, but that’s not news as I think until we get rid of the health insurance industry and institute universal budgets we’ll all continue to pay higher premiums and taxes. Seems it may be time for congress to realize that their well paying “friends” in the insurance industry are just a bunch of back stabbers – public option anyone? Spike’s right, we’re already in a death spiral.

  24. Bob, let’s be real here. The Death Spiral is what’s already going on. Employers are already getting out of providing insurance as fast as they can. And insurers are getting a huge boost of new members thanks to reform.
    And the PWC report is so full of holes and irrational worst-case-scenarios that there’s no way their predictions could possibly come to fruition.
    Don’t you find it funny that the health insurance industry is suddenly finding themselves concerned with the plight of those purchasing insurance on the individual market?
    AHIP’s “analysis” was politics pure and simple. The fact that you’re so credulous of their findings is seriously damaging your credibility as an expert on these matters.

  25. Great picture. I think they are ordering lunch. The Senate and House have a huge political problem which they wish to solve with all of healthcare hijacked into a single system that makes everyone equally miserable, thereby solving their political problem. They will replace senior votes with young voters who are cheaper to corrupt and bribe.

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