Latest Senate Health Bill Is Costly, Says Insurers' Study

NU Online News Service, Oct. 12, 3:51 p.m. EDT

WASHINGTON–An insurance trade group said a study shows new taxes on health care providers proposed in a Senate health care reform bill would raise the cost of health insurance by 14 percent over the next five years.

America's Health Insurance Plans said a study it commissioned by consulting firm PricewaterhouseCoopers found the increase over the costs in the current system would apply to individuals, families and businesses.

AHIP is using the study as part of a new initiative to win changes in the bill, America's Health Future Act. The industry group took aim at the measure as the Senate Finance Committee prepared to vote on the legislation tomorrow.

The measure would impose new taxes on health insurers, prescription drugs and medical devices in order to pay for coverage of the uninsured.

Health insurance agents also attacked the bill.

Joel Kopperud, director of government relations for the Council of Insurance Agents and Brokers, said, "The taxes imposed on insurance companies in the senate finance bill are certain to be passed on to consumers."

"They encourage employers to cut ancillary benefits to avoid crossing the tax threshold, and even the Congressional Budget Office says that the proposed fees will result in higher premiums," he added.

But, in unveiling the study by PricewaterhouseCoopers, Karen Ignagni, AHIP president and CEO, said that despite the new analysis and advertisements AHIP launched over the weekend attacking the bill, it does not signal that the health insurers AHIP represents are walking away from the table.

Ms. Ignagni indicated that she will suggest to the committee ways the bill can be amended to accomplish its goals without raising the cost of health care to individuals, families and small businesses, as the report said it would.

She explained that Congress must not abandon the original goal of health care reform legislation, which is bending the cost curve. "The current legislation cannot fulfill the goal of reform," she said.

The report said the current legislation would impose "insurance market reforms and consumer protection that would raise health insurance premiums for individuals and families if the reforms are not coupled with effective coverage requirements."

AHIP is using the study to argue that the Senate Finance bill doesn't expand the mandates on coverage, nor impose strong enough penalties for lack of coverage, as required to reduce overall costs for everyone.

Regarding taxes, the Senate bill would impose a tax on health insurers of $5.5 billion in 2010, increasing to $6.1 billion per year in 2011, then hold steady at $6.1 billion per year. That provision could raise about $60 billion over the 10-year period analyzed, according to an analysis by the Joint Committee on Taxation.

She also cited cost-shifting as a result of cuts to Medicare.

Unlike the proposals reflected in the Senate bill, controlling the current 6 percent growth in health care costs will require "restructuring and realigning the incentives in the system," the report said.

The taxes Ms. Ignagni talked about do not include provisions in the bill imposing taxes on so-called "Cadillac plans," Ms. Ignagni said during a conference call. But, the report AHIP commissioned said that the excise tax on Cadillac plans could, in a few years, "also raise premiums for some moderate value plans."

The Cadillac tax provisions would impose a 40 percent excise tax on individual health coverage with a value greater than $8,000 and family coverage with a value greater than $21,000 starting in 2013. The excise tax revenue would start at $9.5 billion in 2013 and total $201 billion from 2013 to 2019, the JCT analysts estimate.

According to the PwC study, the current Senate Finance bill, on average, will increase the cost of private health insurance coverage by 26 percent between 2009 and 2013 under the current system and by 40 percent during this same period if these four provisions are implemented.

The study said it would raise costs by 50 percent between 2009 and 2016 under the current system and by 73 percent during this same period if these four provisions are implemented.

It estimated costs would rise by 79 percent between 2009 and 2019 under the current system and by 111 percent during this same period if these four provisions are implemented.

The report was heavily criticized by the American Association of Retired Persons. "I really don't think it's worth the paper it's written on,If anyone believes it, that's a problem, " said John Rother AARP executive vice president.

Scott Mulhauser, a spokesman for Finance Committee Chairman Max Baucus, D-Mont., called the report "a health insurance company hatchet job, plain and simple,"