What do health insurers want now?
After coming out against the Affordable Care Act in the final stage of the debate, the health insurance industry backed more Republicans than Democrats this election cycle, betting they'd be better off under a GOP-led Congress. One conundrum is that health insurers strongly support the individual mandate to purchase insurance -- the provision that's become Public Enemy No. 1 for most conservatives who oppose "Obamacare." The industry has also declined to support the GOP's demand to repeal the law. But insurers are guessing -- rightly -- that repeal is exceedingly unlikely, and that it will be up to the courts, not Congress, to decide the fate of the individual mandate anyway. In the meantime, there are other ways the industry would like to gut the law, and they're trying to persuade Republicans -- and some moderate Democrats -- to join them. Politico's Pulse reports:
Insurance industry sources tell PULSE they are waiting for the post-election dust to settle before diving into two main issues: dialing back cuts to Medicare Advantage plans and attacking the $6.7 billion yearly premium tax set to take effect in 2014. The issues resonate with constituent groups that Democrats have arguably had the toughest time getting on board with reform: seniors and small business.
"I think when it becomes very clear to small business owners that they're going to have to pay more for their premiums that becomes a very serious issue," one insurance industry source tells PULSE of soon-to-come efforts to push back against the health premium tax, expected to hit small group plans the hardest.
I suspect that Republicans would be pretty amenable to going after health care on these grounds. During the debate over the bill, the Medicare Advantage cuts were at the heart of the GOP's claim that Democrats were trying to slash entitlement benefits for seniors. Their attacks were misleading: Medicare Advantage plans are actually generously padded private insurance plans -- a Supersized, more costly version of standard Medicare -- that Democrats believed taxpayers shouldn't subsidize so heavily. But together with the charge that the law would create "death panels," the outcry over the Medicare Advantage cuts allowed the GOP to convince the public that bill would be a poison pill for the elderly.
Similarly, labeling the excise tax on the insurance industry as a "tax on small businesses" doesn't give the complete picture. The yearly premium tax is a blanket fee that's placed on the entire insurance industry, starting at $8 billion in 2014 and increasing to $11.3 billion for the three years thereafter, divvied up based on the industry's share of covered lives and market share. In other words, it's a broad-based fee that doesn't single out premiums for small businesses, per se.
According to Peter Harbage, a District-based health policy analyst, the industry will probably argue that it will end up passing such costs onto small businesses disproportionately because of new regulations that require insurers to spend at least 80 percent of premium costs on medical care for individual and small-group plans. (For larger employers, the so-called Medical-Loss Ratio is higher, at 85 percent, which gives insurers less room to increase overhead costs.) But the difference between the two MLR classes isn't much, and to cast the tax as a special burden for small businesses seems more like convenient political strategy than a policy descriptor.
The purpose of the fee itself is pretty straightforward: It's meant to generate revenue to offset the cost of the law, and it's easy to see why industry would be inclined to oppose it. Other private-sector stakeholders — like Pharma and the medical device industry — must pony up similar fees under the ACA, and they aren't thrilled about it, either. The reality is that every stakeholder has to bear some of the burden of offsetting the costs of the law, in exchange for the benefits they'll receive — e.g. a vast new pool of customers for the insurance industry. Whether or not the insurers decide to pass the costs of this excise tax onto small businesses, or any other customers, is a business decision that each company itself will make. And even if they do decide to raise premiums, there are other provisions under the law that will help make health care more affordable for small businesses, including tax credits and the new exchanges that will also be in effect by 2014.*
Democrats defended such provisions passionately when the bill's passage was on the line. But the Democratic Party has since put so much distance between itself and health-care reform -- fearing the repercussions in an election year -- that it's easy to forget that they had ever done so. As a result, the law's opponents have yet again gained the upper hand in messaging, and even Democratic voters don't recognize all that's been accomplished.
That being said, there is an upside to the revival of these Republican and industry-led criticisms of the Affordable Care Act. The renewed attacks give Democrats another opportunity to change the public's understanding of health-care reform -- that is, should they decide to step up to the plate this time and embrace the law instead of trying to disown it.
*Correction: The original post referred to this excise tax as the Cadillac tax on high-cost insurance plans. The tax in question is a different provision.
This post has been corrected since it was first published.
| November 5, 2010; 5:14 PM ET
Categories: Health Reform
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