What Do the Insurers Want?
The "analysis" the insurance industry commissioned should not be treated as a policy document. It's a political document. In it, the insurers assail policies they don't like (though under the guise of concerning themselves with consumer premiums) and pump up policies they do like. There's no real "prescriptions" section to the paper, but it's easy enough to discern what the insurers do, and don't, want.
1) A Stronger Individual Mandate: This is the point of the first section, which argues that the regulations forcing insurers to offer coverage to all people at similar prices will lead to a death spiral in the absence of a stronger individual mandate. They worry that the absence of a strong individual mandate will mean that healthy, young people who don't want to pay for insurance will simply pay the penalty instead. At the same time, sicker, older people who've been priced out of the market, or denied care outright, sign up for insurance. This makes the "risk pool" -- which is to say, the population being served by the insurer -- a bit older and a bit more expensive, which means premiums go up for everyone.
Insurers want a stronger individual mandate to ensure that everyone enters the system and the risk pool doesn't tilt away from the healthy and towards the sick. That's good policy, but it would also require more subsidies to make the mandate affordable. The problem? The rest of the report is dedicated to attacking every single way that health-care reform can pay for itself.
2) Eliminate the Excise Tax: When your employer pays you a dollar in wages, that dollar is really only worth whatever is left after you pay taxes. When your employer pays you a dollar in health-care insurance, that dollar is never taxed, so it's worth a full dollar. A dollar in health care, in other words, is more valuable to a worker than a dollar in wages.
This tax exemption does two things: it costs the government a huge amount of money, and it makes the health-care system much more expensive by routing everything through employers (more on that here). Originally, reformers wanted to cap the exemption for employer-provided health care. That would raise money, and create an incentive for employers and workers to choose less costly plans. Unions and employers were furious, and all was gridlock. It was John Kerry's office that hit upon the solution: an "excise tax" on insurers who offer high-cost plans.
Under this proposal, insurance plans over $21,000 would see the excess spending subject to a 35 percent tax. A $23,000 plan, for instance, would see the final $2,000 taxed. This does exactly the same thing as capping the employer deduction, but because it's taxing "insurers" rather than "businesses," the politics are better. In either case, though, the increase would be passed onto workers, and economists expect workers to gravitate towards cheaper plans as a result of it. Insurers don't like this tax, much as Lexus wouldn't like a tax on luxury cars. But then, the income that goes to purchase luxury cars isn't currently sheltered from taxation, so Lexus would have a better case.
3) No Medicare Payment Cuts: Insurers don't want the government to negotiate lower prices with hospitals, because they fear that the hospitals will roll over for the government and seek to recoup costs by charging insurers more. Insurers, who are fractured and weak compared with the hospital industry, say they won't have the strength or leverage to resist. Properly understood, this is an argument for a single-payer system, or for Medicare-for-All.
4) No New Taxes: The final section is straightforward enough. To help pay for health-care reform, the bills impose small taxes on the insurance, pharmaceutical and medical device industries. The insurers don't want to pay those taxes.
In other words, the insurers want health-care reform to have a stronger mandate, which will require substantially more spending, which means we'll need more revenue. But they oppose all the new revenue streams that help pay for the bill, and they oppose the major sources of savings that help offset the remaining cost of the bill. And they say the Finance Committee's numbers don't add up? That's some chutzpah, as my grandmother would say.
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