By: Health Insurance
Submitted: 2009-12-27 14:56:50 | Word Count: 745
Debate in the Senate over the Democratic leadership’s $848 billion bid to overhaul the American health care system is in full swing. Sen. Max Baucus, D-Mont., a chief architect of the reform bill, declared from the Senate floor that “health care reform is fundamentally about lowering health care costs.”
Fair enough — and a worthy goal. Unfortunately, several recent studies have concluded that the reform plans emerging from the House and Senate would result in higher insurance costs for most people.
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The most recent one, from the nonpartisan Congressional Budget Office, revealed that premiums in the individual market would increase 10 percent to 13 percent more under the plan favored by leading Senate Democrats than they would in the absence of reform. The price of employer-based insurance would increase at the same rate with or without reform. It’s hard to figure out why the Senate would spend a trillion dollars to advance reforms that would have so little positive impact on Americans.
Another study, conducted by consulting firm Oliver Wyman, found that the Senate plan would cause the price of a year’s worth of individual coverage for a new enrollee to jump $1,500. Family coverage would go up $3,300.
A third series of studies using data from WellPoint, the country’s largest insurer, arrived at a similar conclusion. Researchers determined that health insurance premiums would dramatically increase in all 14 states where WellPoint currently operates Blue Cross plans. The average young, healthy customer would experience an incredible 154 percent premium increase. And the average family premium would rise by 85 percent.
In Missouri, the situation is particularly bleak. The average 25-year-old man pays about $60 per month for insurance today. After these reforms, he’d pay $166 — a 178 percent increase. Premiums for a family with two kids in Missouri would increase substantially, from $373 to $768 per month.
The reform package would also wreak havoc on small businesses. Taken together, the various elements of the House and Senate bills could increase premiums for small employers 88 percent, according to the WellPoint data. As a result, many firms would quit offering insurance to their employees. In fact, Oliver Wyman estimates that 2.5 million fewer workers at small businesses would get their insurance through their employer under reform.
The primary reason for these price increases is the Senate package’s lack of an effective “individual mandate” that requires everyone to obtain insurance. Starting in 2013, the Senate bill would fine anyone who doesn’t have insurance $200. By 2018, that fine would increase to $750.
By the time these fines are in full force, the average individual insurance plan is expected to cost $5,000, according to the CBO. If the price of an insurance policy is many times higher than the financial penalty, a great number of healthy individuals will go without insurance and opt to pay the fine.
Other elements of the reform effort would only exacerbate this trend. For instance, provisions that require insurers to issue policies to all applicants and restrict their ability to charge premiums based on a person’s health status would encourage young, healthy people to remain uninsured until they absolutely need a policy. In fact, Oliver Wyman estimates that 12.6 million individuals would forego coverage in the absence of an effective mandate.
That makes sense — why pay insurance premiums if you can get coverage for the same price when you’re ready to use it?
These “guaranteed issue” provisions are well-meaning, but they’ll cause insurance rates to skyrocket. If young, healthy people — who tend to consume less care — leave the insurance pool, only high-risk, high-cost folks will remain. Insurers will have no choice but to raise premiums.
It’s important that Congress ensure that everyone has access to insurance, regardless of pre-existing or chronic conditions. But such a goal is unattainable without an effective individual mandate that draws everyone into the insurance pool.
Americans deserve a world-class health system that provides high-quality, affordable care. Unfortunately, the reforms under consideration in Congress will dramatically push up prices, putting health insurance out of reach for an even greater segment of Americans.
