Summary
The latest ad from the group Conservatives for Patients’ Rights claims that "new rules could hike your health insurance premiums 95 percent." That’s misleading.
- The claim in the ad refers to only 5 percent of Americans who have health insurance – those who buy it on their own.
- The claim comes from an analysis by a group that advocates for insurance carriers that sell policies in the individual market, among other areas.
- That analysis also doesn’t take into consideration several elements of leading congressional legislation that other experts say will keep premium costs down – and in fact, lower premiums for some. Other independent studies show premium costs decreasing on average for Americans that currently have health coverage.
- It’s not true that any of the health care overhaul measures that have been approved by committees in Congress would add "a trillion to the federal deficit," as the ad says. The Senate bill would add roughly $597 billion over 10 years, and the House bill that was approved by the Ways and Means Committee in mid-July would add a much smaller $239 billion, according to the Congressional Budget Office.
Analysis
We’ve written about two previous misleading ads from the group Conservatives for Patients’ Rights, whose TV spots argue against health care overhaul efforts that are moving through Congress. This ad puts forth a new claim, saying that "new rules could hike your health insurance premiums 95 percent." That’s a startling statement. But it’s contradicted by other experts that find premiums would actually go down under the leading proposals in Congress.
Conservatives for Patients’ Rights Ad: "Squeeze"
[TET ] Narrator: Some of Congress’ health care plans could squeeze you four ways. It could raise taxes by $600 billion, even taxing soda. It could add a trillion to the federal deficit. New rules could hike your health insurance premiums 95 percent.
And you might still end up on their government-run health plan.
Tell Congress you’ve been squeezed enough. Say no to a government-run health plan.[/TET]
We note first that CPR’s claim of a 95 percent increase applies only to about 1 person in every 20, a fact that the ad obscures. The announcer tells the viewer that "your" premiums could rise that much, but an on-screen graphic, easy for the casual viewer to miss, says that would occur "if you buy coverage." In fact, the vast majority of those who have coverage don’t buy it individually. Most are covered through employers or through such programs as Medicare or Medicaid. While about 14 million people do buy their coverage personally, they amount to only 5 percent of those with health insurance. So the announcer’s claim that "your" premiums could go up is false, even by CPR’s own evidence, for 95 percent of viewers with insurance.
Furthermore, the analysis on which CPR bases its claim comes from an advocacy association of insurance providers that says its mission is to "promote free market solutions" to America’s health care challenges. Member companies specialize in, among other areas, the individual market. Its analysis focuses only on proposed rules that could raise premiums, while failing to consider provisions of the House and Senate health care bills that would lower premiums, especially for those who would be buying policies as individuals.
The advocacy group, the Council for Affordable Health Insurance, published a report in May titled "Should We Abandon Risk Assessment in Health Insurance?" It projected what might happen to insurance premiums for those who buy their own insurance policies – that is, not policies provided by employers – if insurers couldn’t turn down applicants (guaranteed issue) and if they couldn’t charge different prices based on health and other factors, such as gender (community rating). The CAHI analysis also predicted what happens under an individual mandate, which would require the everyone have insurance. Under those conditions, it says, based on an analysis by actuary Mark Litow, insurance premiums would be 95 percent higher than they would be without any of those conditions.
The analysis, on closer examination, doesn’t purport to be a study of any specific legislation that’s actually been proposed in Congress. Meanwhile, one independent study of the House bill as introduced finds that health care spending for families that currently have insurance wouldn’t go up at all – in fact, their costs would go down by $312 per family on average or $768 per family in 2011. That’s for both premiums and out-of-pocket costs, depending on who was eligible to buy coverage through the insurance exchange. The exchange would offer a choice of private insurance plans and a federal option that meet certain benefit requirements; individuals and small businesses could purchase coverage through the exchange – eventually, it might be open to all business, according to the House bill. The study, by the Lewin Group, found that health spending for families across all income groups would go down, except for one scenario under which families earning more than $150,000 would pay $49 more on average (see Figure ES-4). The Lewin Group is part of a subsidiary of UnitedHealthGroup, which owns the insurer United Healthcare. Lewin says it has “editorial independence,” and its studies have been requested and cited by both Republicans and Democrats.
Other experts we consulted told us that premiums in what is now a highly variable individual market would by and large be lower because of various elements of congressional legislation that CAHI doesn’t consider. "The combination of requiring everyone to have coverage, pooling through an [insurance exchange], should both on average lower the rate, particularly for anyone who has anything, even minor illnesses wrong with them," says Cathy Schoen, senior vice president of the Commonwealth Fund, which published a study that found premiums would decrease under several scenarios similar to what’s been proposed in Congress.
We’re not disputing or endorsing CAHI’s limited analysis, but it does not reflect the legislation that has been introduced in Congress, as both CAHI and CPR imply. And other experts disagree with it.
The Individual Market
In general, those who purchase policies individually are a healthy lot. In many places, those with health issues often can’t get or can’t afford their own health care. Under CAHI’s analysis, these less-healthy folks would enter the individual market if new federal rules prevent insurers from turning them down (guaranteed issue), and required that companies charge everyone the same price or close to it (community rating). Those higher-risk folks would drive up premium costs for the rest, causing healthy people to exit the market (assuming no individual mandate), further driving up costs. Under such a system, "if you can get insurance when you’re sick … why buy it when you’re healthy," says Litow, who says he did this analysis personally for CAHI. That’s true as far as it goes, according to other experts. If one only looks at guaranteed issue and community rating, says John Sheils, senior vice president of the Lewin Group, you’d see a "strange result" – some premiums would go up, others (for the less healthy) would go down.
But an individual mandate, currently part of both the leading House and Senate bills, would keep premium costs down, Sheils and others say. "The individual mandate is important," says Linda Blumberg, a senior fellow at The Urban Institute who researches health care issues. The mandate "holds the healthy into the marketplace."
These experts say an individual mandate also would bring more healthy people in. The mandate, Sheils told us, "brings a lot of people into this insurance pool [who choose not to buy coverage now] … and if you look up their demographics, they’re pretty young. So universal coverage forces these people to come in."
Litow admits that "you have to have the mandate" if insurance companies are required to take all comers. And he estimates that there would still be a near doubling of premium increases even with the mandate – though he made clear to FactCheck.org that this is not an average and premium costs would vary from state to state. The analysis is not a reflection of average premium payments nationwide or in certain areas of the country; instead, it’s a theoretical look at what could happen to premiums in a state that goes from having no rules on guaranteed issue or community rating to having both of those things. Even Litow concedes that premiums would probably go down in New York, which currently requires guaranteed issue and community rating but has no mandate. But he believes there would have to be limits on the choice of plans along with the mandate. Otherwise, healthy people could gravitate to certain plans and sick people to others. And, he says, "it’s extremely difficult even if you mandate [people] to force them in."
CAHI speaks only for a small segment of the health insurance industry, and it’s out of step with the industry’s main lobbying organization. America’s Health Insurance Plans is advocating an individual mandate coupled with guaranteed issue and community rating. AHIP’s latest ad, airing on a seven-figure buy, says: "If everyone’s covered, we can make health care as affordable as possible. And the words ‘pre-existing condition’ become a thing of the past.” The group has stressed that a guaranteed issue requirement has to come with a mandate for universal coverage. (AHIP is against including a federal plan in health care legislation.)
America’s Health Insurance Plans Ad: "Illness"
[TET ] Narrator: Illness doesn’t care where you live. Or if you’re already sick. Or if you lose your job. Your health insurance shouldn’t either. So let’s fix health care. If everyone’s covered, we can make health care as affordable as possible. And the words ‘pre-existing condition’ become a thing of the past. We’re American’s health insurance companies, supporting bipartisan reforms that Congress can build on. [/TET]
Other Ways to Lower Costs
CAHI claims that its report shows what will happen to premiums "under Democratic plans," but Litow’s analysis doesn’t include major components of the House and Senate bills that have been proposed thus far. The House bill offers subsidies to low-and moderate-income people who buy their own coverage, for one; it also pools risk for those people, and small employers, by setting up an insurance exchange. And, in what may be the most controversial of its measures, it sets up a federal health care plan that can offer plans at a lower rate to the individual and small group market.
"You can’t take that report and apply it to the House bill at all," Sheils told us of CAHI’s analysis, because it doesn’t take into consideration several aspects of the bill. "The House bill overlays such a thick layer of subsidies," Sheils says. And the subsidies are targeted to those who aren’t offered coverage through an employer – the very group for whom CAHI claims premiums will nearly double.
The exchange would also pool risk – in the way that large employers are able to do with many people in the same plan, says the Commonwealth Fund’s Schoen. And that would lower the high underwriting and marketing costs in the individual market, costs that are high because it’s expensive to sell person to person. Currently, in the individual market, between 25 percent and 40 percent of premiums goes for the costs of underwriting and marketing, or something other than paying medical expenses, Schoen says. "If you pool and can offer more group rates to individuals, the share of premiums that goes for something other than claims will go down dramatically."
The Urban Institute’s Blumberg agrees, and also says that out-of-pocket costs for those in the individual market should decrease. "Coverage is much less comprehensive on average than what employer coverage looks like," she says. "People have a lot more out-of-pocket costs" than do those with employer-sponsored insurance. With an exchange that requires a certain level of coverage, the policies should be more comprehensive, lowering deductibles and other non-covered medical expenses.
Litow concedes that he didn’t look at the effect an insurance exchange would have in doing his estimates. But he doesn’t think exchanges are helpful. "They’re going to set hard and fast rules … in my opinion, they just aren’t going to work well." He says if costs come down, one has to ask, do they drop because people don’t have access to care?
Also not included in Litow’s calculations is the likely effect of a new federal health insurance plan. Based on the House bill as introduced, the Lewin Group analysis said that the federal plan would offer premiums that are 20 percent to 25 percent less than comparable private insurance, since the plan would pay doctors and hospitals much less than their private insurance rates. It would pay providers what Medicare does, plus 5 percent. However, on July 31, the House Energy and Commerce Committee amended the bill to say that the federal plan would negotiate rates with health care providers. That mirrors the set-up in the Senate bill from the Health, Education, Labor and Pensions Committee. A federal plan structured in that way wouldn’t have such a big effect on premium costs: The Lewin Group found that such a payment structure would result in premiums that are about 10 percent less than those offered by private insurance (see Figure 4). These details, and many others in the House and Senate bills, are still in flux. The House is working to bring together the versions of its bill that have passed three committees.
But premiums would go down even without the competition of a low-cost federal option, according to an analysis by the Commonwealth Fund, using Lewin Group estimates. It found that private plan premiums would decrease by 3 percent, largely because of the efficiencies and competition brought about by the proposed insurance exchange (see Exhibit ES-4). "We found that more of the premium would go out in claims and for the small group and individual market, premiums would start to look more like the large group market," Schoen told us. "It doesn’t help the large group market at all. … They already get the best deal out there."
Some Could Pay More
It’s true that some in the individual market would likely pay more. "There’s going to be redistribution," the Urban Institute’s Blumberg says. Someone who’s healthy and getting a good deal in the individual market "could very well pay more in premium," she says, unless they have a lower income and qualify for a subsidy. But, she notes, they’re also getting more long-term security with their health coverage and the assurance that if they get sick, their costs won’t skyrocket. And they may have lower out-of-pocket costs as well. "There are a lot of complex dynamics going on here." Blumberg adds that it’s "pretty easy" to sell low priced policies to perfectly health young people, "but that’s not the goal of health care reform."
Sheils, too, says that even with the mandate and subsidies and insurance exchange, certain people, perhaps a self-employed, not necessarily young person buying their own insurance, "would probably see an increase" in their premium. But, he says, "I find it hard to believe that it would be a 95 percent increase."
The Rest of the Ad
The Conservatives for Patients’ Rights ad also says that a health care overhaul "could add a trillion to the federal deficit," referring to an article in Fortune magazine in July. The article did say that, and it’s even true that the Congressional Budget Office predicted that, at least for an early version of the Senate HELP Committee’s bill.
But the magazine should have updated its piece before going to press. A more recent (July 2) CBO analysis of the Senate bill predicts a net increase in the federal budget deficit of $597 billion over 10 years. CPR should have known this since it is ostensibly following the health care debate. The bill that passed committee in the House in mid-July would add to the deficit by only $239 billion over 10 years, CBO says. (We have not been able to locate a CBO analysis of the deficit impact of a version of the bill that passed the House Energy and Commerce Committee on July 31.)
As for the "$600 billion" in taxes, the House bill proposes a surtax on individuals earning more than $280,000 a year that would raise $583 billion, according to the Congressional Budget Office. A tax on soda was one of many proposals being considered by the Senate Finance Committee.
And could you "still end up on their government-run health plan," as the ad says? Well, if you buy your own health care, you’d have to make the decision to buy into that government-run (aka public) plan. If you’re employed, your company could decide to switch to the significantly cheaper federal plan, if the firm is eligible to do so. The bills limit who can participate in the plan, and it remains to be seen what the final House or Senate legislation will say on that. If the federal plan reimburses providers at rates similar to those paid through private insurance (rather than Medicare rates), then it won’t attract nearly as many businesses or individuals. See our previous article, "More Health Care Scare," for more details.
– by Lori Robertson and Viveca Novak
Sources
Council for Affordable Health Insurance. “Should We Abandon Risk Assessment in Health Insurance?” CAHI’s Issues & Answers. May 2009.
Focus on Health Reform, Health Care Reform Proposals. Kaiser Family Foundation. Accessed 31 Jul 2009.
Sheils, John and Randy Haught. “Cost and Coverage Impacts of the American Affordable Health Choices Act of 2009.” Lewin Group. 27 Jul 2009, amended 31 Jul 2009.
Schoen, Cathy, et. al. “Fork in the Road: Alternative Paths to a High Performance U.S. Health System.” The Commonwealth Fund. 24 Jun 2009.
Sheils, John and Randy Haught. “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options.” Lewin Group, 6 April 2009.
Congressional Budget Office. Letter to Rep. Charles B. Rangel. 17 Jul 2009.
Congressional Budget Office. Letter to Sen. Edward M. Kennedy. 2 Jul 2009.
Colvin, Geoff. "National Health Care May Never Happen." Fortune. 20 July 2009.
Litow, Mark. Interview with FactCheck.org. 28 Jul 2009.
Sheils, John. Interview with FactCheck.org. 29 Jul 2009.
Blumberg, Linda. Interview with FactCheck.org. 30 Jul 2009.
Schoen, Cathy. Interview with FactCheck.org. 30 Jul 2009.