Insurance industry fights back with PriceWaterhouseCoopers report

posted at 11:36 am on October 12, 2009 by Ed Morrissey

Until now, the health-insurance industry has mainly held its fire against the ObamaCare proposals in Congress, hoping that its givebacks would be enough to sate the Democratic class warfare that erupted this summer.  Now, however, they have apparently taken off the gloves with a new analysis by accounting firm PriceWaterhouse Coopers.  The study predicts that the Baucus plan would increase premiums for an average American family by $4,000 per year, a breathtaking increase from a plan that purports to save costs:

After months of collaboration on President Obama’s attempt to overhaul the nation’s health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.

The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year’s health-care reform drama.

Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.

That prompted a rather snide — and laughable — response from the Obama administration:

“Those guys specialize in tax shelters,” said Nancy-Ann DeParle, director of the White House Office of Health Reform. “Clearly this is not their area of expertise.”

Er, what?  Health insurance premiums are not the area of expertise for health-insurance companies?  Accounting is not the expertise of accounting firms?  We can compare that to the White House, whose expertise thus far has been in getting elected, and not much else — certainly not economics, military strategy, or governance.

This doesn’t surprise me in the least.  The Baucus plan is chock-full of fees and taxes, which Democrats keep insisting will punish those meanie insurance executives and doctors who steal tonsils and feet for big, big money.  As with all such penalties on producers, the costs get borne by the consumers.  Given the wide-randing taxes on medical devices and the “fees” Baucus envisions for an industry with an average profit margin of 3.3%. I’d actually guess that the $4,000/year increase may shoot a little low.

If we want to make health care more available and more affordable, we need to avoid imposing new costs on the industry and remove pricing opacity.  This isn’t brain surgery, another discipline for which this White House doesn’t have expertise.


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Dr. Steve, looks like the CBO used the low fines version of the bill:

“The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary analysis of the Chairman’s mark for the America’s Healthy Future Act of 2009,incorporating the amendments that have been adopted to date by the
Committee on Finance. That analysis reflects the specifications posted on the committee’s Web site on October 2, 2009, corrections posted on October 5, and additional clarifications provided by the staff of the
committee through October 6. CBO and JCT’s analysis is preliminary in large part because the Chairman’s mark, as amended, has not yet been embodied in legislative language.”

See http://www.cbo.gov/doc.cfm?index=10642&zzz=39653.

Jimbo3 on October 12, 2009 at 1:27 PM

it would cost me about $2700/month in Texas for my family under Texas’ high risk pool insurance.

Jimbo3 on October 12, 2009 at 1:12 PM

The percentage of this issue that is MY problem: 0%

venividivici on October 12, 2009 at 1:28 PM

Iliked–AUH2O With humble apologies to Jimbo3 on October 12, 2009 at 12:20 PM — who is very smart,

Send everyone to Cuba who doesn’t have coverage and pay them the $200 they collect from everyone else down there. Ask Michael Moore. BTW, Hannity really went powder puff with him during their “debate”.

Goldwater, thanks much for the compliment.

One related thing to consider: Medical care costs much less in Mexico, Panama (I’m told) and Costa Rica than it does in the US. In a lot of non-emergency situations, it would make economic sense to go there for treatment, even after considering the cost of a hospital/hotel and plane flights.

Jimbo3 on October 12, 2009 at 1:32 PM

venividivici, if you have employer-provided group health insurance now, how likely is it that you’ll voluntarily or involuntarily change/lose jobs? Once COBRA runs out, unless your wife/husband has a group health plan, you may well have a problem getting coverage.

Jimbo3 on October 12, 2009 at 1:34 PM

you may well have a problem getting coverage.

Jimbo3 on October 12, 2009 at 1:34 PM

And if that happened, I would take full responsibility for it and not expect the government to come running to “save” me with money I’d already sent them in taxes. All of these stupid entitlements are government jobs programs. Take care of your own issues. Your problems (health or otherwise) are not my problems and vice versa. I see no reason to pretend that “we’re all in this together” and so we should all pay the same for insurance. No, we’re not.

That said, I am in favor of reforming the health insurance market so that it is not so directly tied to employment, since people do tend to switch jobs much more now than they did when those laws were put in place, so recognizing that reality makes logical sense.

venividivici on October 12, 2009 at 1:42 PM

To the left then to the right

Lefiies, when are you going to start paying for your ‘something for nothing’ schemes with your own money? Start your own insurance plan and take all the oppressed which need the help. See if your rates go up.

Righties who cussed me, I can respect Hillary Clinton, Jimbo3 on October 12, 2009 at 12:20 PM, or Barack Hussein Obama and David Duke if I want. BYW, are we permitted to say His Holy middle name yet, or is it still blasphemy?

IlikedAUH2O on October 12, 2009 at 1:44 PM

If this accounting firm is so bad, then why are they trusted now for years and years to count the OSCARs votes?

immigrantchick on October 12, 2009 at 1:45 PM

BAsed on Obama, PriceWaterHouse is an evil tax haven firm, but they are one of the most famous and most trusted firms, even the Obama bots in Hollywood trust them to determine the winners of the Oscars or should we assume we cannot trust any of the past or future Oscars results.

immigrantchick on October 12, 2009 at 1:47 PM

That’s brilliant. PriceWaterHouse is the very image of inscrutable, objective accountants.

And the White House laughs them off. Maybe if the SEIU came out with a statement on health care, they’d believe it.

hawksruleva on October 12, 2009 at 1:51 PM

That said, I am in favor of reforming the health insurance market so that it is not so directly tied to employment, since people do tend to switch jobs much more now than they did when those laws were put in place, so recognizing that reality makes logical sense.

–So, how would you reform it, venividivici? Anything requiring coverage of pre-existing conditions or a guaranteed issue of individual health insurance policies would increase costs. Right now, employer-provided health insurance policies probably help reduce overall costs somewhat because they aren’t required to comply with many state law provisions that mandate certain benefits and payments.

Jimbo3 on October 12, 2009 at 1:52 PM

Jimbo3 on October 12, 2009 at 1:52 PM

Forcing an individual who does not want to buy insurance or feels he does not need it, is not the solution. It stinks of totalitarianism – today you are forced to buy insurance because someone in texas may not be able to afford his. Tomorrow you will be forced to buy obama’s books and portraits for some other “worthy” government mandated cause.

runner on October 12, 2009 at 1:56 PM

Baucus’ bill requires all Americans without health insurance to buy it, starting in 2013, and creates tax penalties for those who don’t. The original bill had penalties ranging from $750 per person to $3,800 per family.

But an amendment Oct. 1 trimmed those penalties down to zero in 2013, $200 per adult in a household in 2014, $400 per adult in 2015, and up to $750 per adult by 2017.

Insurers say the original mandate wasn’t that strong anyway, and that the new, lighter penalties make it all but unenforceable.

The major problem with TAXING high-end “Cadillac” policies and LOW fines for not having insurance is that employers will have every incentive for dumping group health insurance for their employees and simply a paying a small fine, leaving tens of millions of employees without health insurance. If we now have 30 million uninsured (or 47 million with illegals), that number could easily double or triple with the Baucus bill.

Steve Z on October 12, 2009 at 1:58 PM

I definitely trust the government more than a private accounting/auditing firm like PWC.

txag92 on October 12, 2009 at 11:49 AM

Here is some advice from your government….

those bloggers need to take off their pajamas, get dressed

That is what they think of your support and advice…

right2bright on October 12, 2009 at 2:05 PM

One final point (at least on this thread), I agree with Steve Wynn, the administration needs to focus on job creation, health care reform is not a priority. These kinds of issues can be discussed when unemployment is not in the double digits and the economy is sound. But, they are incapable of doing anything positive in that direction. They are only good at redistribution of wealth they did not earn.

runner on October 12, 2009 at 2:07 PM

We’re racist for not wanting to give up our hard earned dollars to help the lower end of the wage scale.

/snark

Mangy Scot on October 12, 2009 at 2:07 PM

The major problem with TAXING high-end “Cadillac” policies and LOW fines for not having insurance is that employers will have every incentive for dumping group health insurance for their employees and simply a paying a small fine, leaving tens of millions of employees without health insurance. If we now have 30 million uninsured (or 47 million with illegals), that number could easily double or triple with the Baucus bill.

Steve Z, most employers currently provide health insurance for employees without having any legal requirement to do so. Why would employers suddenly decide it makes sense to dump health insurance and pay a fine?

Jimbo3 on October 12, 2009 at 2:16 PM

Why would employers suddenly decide it makes sense to dump health insurance and pay a fine?

Do the math. It would be cheaper to pay the fine..

Caper29 on October 12, 2009 at 2:23 PM

–So, how would you reform it, venividivici?

Jimbo3 on October 12, 2009 at 1:52 PM

I would start by making it easier to form groups and to design policies that are not filled with politically-motivated mandates.

Any reform that raises my costs to subsidize others is a non-starter with me. I have my own bills to pay and subsidizing yours is not in my budget.

venividivici on October 12, 2009 at 2:24 PM

Do the math. It would be cheaper to pay the fine..

Caper29 on October 12, 2009 at 2:23 PM

Of course. That’s the flaw in this plan.

You tell me one program in the US that rolled out with NO benefits for 3 years but an expectation that people would pay up.

It is absurd.

AnninCA on October 12, 2009 at 2:25 PM

“Those guys specialize in tax shelters,” said Nancy-Ann DeParle, director of the White House Office of Health Reform. “Clearly this is not their area of expertise.”

Er, what? Health insurance premiums are not the area of expertise for health-insurance companies? Accounting is not the expertise of accounting firms? We can compare that to the White House, whose expertise thus far has been in getting elected, and not much else — certainly not economics, military strategy, or governance.

Tomorrow’s Obamateurism?

ThereGoesTheNeighborhood on October 12, 2009 at 2:35 PM

If the pharmaceuticals industry was smart they would also realize that Obama will turn on them real fast as soon as a health care bill is passed. Then he will state that the statute of limitations on their deal has run out and those evil Big Pharma companies will have to pay. They should be fighting Obamacare now while they still can.

Christian Conservative on October 12, 2009 at 2:40 PM

It is absurd.

AnninCA on October 12, 2009 at 2:25 PM

TennCare

Employers Prefer “Free” Care to Private Care: If the government offers universal health care, why wouldn’t businesses move employees to the plan as a sound business decision? In Tennessee, this behavior dramatically expanded the public burden as people who had once been on private insurance migrated to the “free” option of public care, adding to the State’s unanticipated cost. Studies indicate that only 55% of those added to TennCare came from the uninsured population, while the rest came from a decline in private coverage.

Caper29 on October 12, 2009 at 2:50 PM

First health reform for all and then amnesty. The one party system will be established and the democracy as we have known it will cease to exist. The poor, blacks and illegals will be the pivot in winning the war against our country without firing a shot. I don’t think Obama wants to ever leave office and every action the democrats take to bring millions of dependent voters to the voting booths only reinforces that possibility.

volsense on October 12, 2009 at 2:59 PM

The poor, blacks and illegals will be the pivot in winning the war against our country without firing a shot.

volsense on October 12, 2009 at 2:59 PM

That seems like a bad bet in a country with as many guns as this one.

It is not feasible that 52% of the population tell the other 48% of the population what to do at the level of granularity that the Left seems to want. It’s not a stable situation and won’t stand for long, electoral processes or no electoral processes.

venividivici on October 12, 2009 at 3:06 PM

That’s why I’m all in favor of requiring people to have health insurance and making it expensive for them if they don’t.

Jimbo3 on October 12, 2009 at 12:06 PM

Which is really just wealth redistribution.

Here’s a concept: Have everybody pay for their own health care, and allow them to buy insurance to cover catastrophic illness/injury. Give them tax breaks to put money in the bank to be used for medical expenses. That brings consumers more in touch with the costs, and creates an incentive for suppliers to offer a lower-cost product. Ok, maybe at the bottom end, you get care fashioned in the image of Ronald McDonald, but I’d rather have a Big Mac than nothing.

The classic examples of letting the market do its thing are Lasik and plastic surgery. The range of product and cost options are staggering: there’s something for everyone, at every price-point.

Look at cellular telephones. Do you really believe that if the profit motive had been removed from the market by the government (after all don’t cell phones enhance the “right” of Free Speech?), we’d have the phones we have today, or would we still have suitcase-sized phones with bakelite handsets?

mr.blacksheep on October 12, 2009 at 3:25 PM

I held a license in Florida to sell life health and fire insurance, so I had that inside look. One of the things that I can say with certianality is that the insurance companies are not just rolling the dice on probablity. They have number crunchers who can tell them what the probablities are that people they insure will die, get seriously ill, get into an accident, or that a house will be destroyed. They are rarely far from the reality of those occurances. If there is anyone in our country that can tell us how much we can expect to pay, it is those people. Their jobs depend on their ability to do so. I would add that they are the ones that “can” read the bills and tell you what is in them; something that congress feels it is incapable of doing.

I think it is a good bet we can trust the bean counters of insurance companies to predict what the result of the health care plan will be. They understand it and what the impact on them, and us, will be. The public is much less aware what is in it, but we have a good idea of what is in it and that it is not in our best interest to have it, and then you have congress who admits they don’t know what is in it or can understand it, let alone feel they can or need to read it, but they will vote for it and figure it out later.

Who do you think we should listen to?

Franklyn on October 12, 2009 at 3:43 PM

“Those guys specialize in tax shelters,” said Nancy-Ann DeParle, director of the White House Office of Health Reform. “Clearly this is not their area of expertise.”

Their first reaction is always to attack the motives and integrity of the messenger. These are dangerous people.

TheBigOldDog on October 12, 2009 at 3:44 PM

Why would employers suddenly decide it makes sense to dump health insurance and pay a fine?

Do the math. It would be cheaper to pay the fine..

Caper29 on October 12, 2009 at 2:23 PM

only in the beginning,than it will have to get more expensive to cover the REAL costs. The fines will go up.

aceinstall on October 12, 2009 at 3:49 PM

Is anyone calling or faxing?
Having followed this health care issue for quite some time and am registered on several sites, the apathy when it comes to action is depressing. Just would like to know if Hotair members are contacting in any way the House and or Senate members on this issue. I’ve sent hundreds of faxes and made calls and certainly don’t receive any answers. I know the involvement of other sites, but was wondering about Hotair. Your thoughts?
Thank you. Ed: appreciate keeping us up to date in order that we may be also.

bluefox on October 12, 2009 at 3:55 PM

Which is really just wealth redistribution.

Here’s a concept: Have everybody pay for their own health care, and allow them to buy insurance to cover catastrophic illness/injury. Give them tax breaks to put money in the bank to be used for medical expenses. That brings consumers more in touch with the costs, and creates an incentive for suppliers to offer a lower-cost product. Ok, maybe at the bottom end, you get care fashioned in the image of Ronald McDonald, but I’d rather have a Big Mac than nothing.

The classic examples of letting the market do its thing are Lasik and plastic surgery. The range of product and cost options are staggering: there’s something for everyone, at every price-point.

–Lasik and plastic surgery are generally one-time, voluntary procedures. That’s not the case if someone gets sick and needs some sort of medical help. Under your plan, there’s no requirement for insurance companies to offer insurance that covers pre-existing conditions or not to raise prices significantly once someone gets sick.

Jimbo3 on October 12, 2009 at 4:10 PM

Insurance is socialization, I’ll pay my bills you pay yours. Lower the cost of health care and make insurance company employee’s go out and get a real job. Two days in a hospital last year cost me 9,000.00 plus for pneumonia, I’m making the payments on my own. Want to do something helpful? Lower the cost of the health care.

aceinstall on October 12, 2009 at 4:12 PM

This does not surprise me at all. I knew that when they said it would cut the deficit, that it would raise prices to consumers instead. After all, nothing is free.

Terrye on October 12, 2009 at 4:17 PM

We won’t have jobs by then anyway, so…

Dr. ZhivBlago on October 12, 2009 at 4:25 PM

Under your plan, there’s no requirement for insurance companies to offer insurance that covers pre-existing conditions or not to raise prices significantly once someone gets sick.

Jimbo3 on October 12, 2009 at 4:10 PM

And if that plan does not offer what people want, no one will buy it. At least they won’t as long as no one is forcing them to do so.

And it would be far easier for the feds to just to disallow recission after a certain period (like they already do with life insurance). Gov’t reinsurance would keep ins companies from raising prices just because you get sick, although sick people really should pay more than well people for health insurance. If they can’t afford it, there’s Medicaid or state high-risk pools. These are small, simple solutions that would directly address our problems instead of throwing the baby out with the bathwater.

alwaysfiredup on October 12, 2009 at 5:04 PM

Under your plan, there’s no requirement for insurance companies to offer insurance that covers pre-existing conditions or not to raise prices significantly once someone gets sick.

Jimbo3 on October 12, 2009 at 4:10 PM

Other than the fact that were I a competitor to an insurance company that increased rates once patients got sick, I would find a way to attract customers by making the undertaking not to do so. I think accident forgiveness in automobile insurance is a somewhat comparable phenomenon.

In any event, demanding coverage for pre-existing conditions is equivalent to demanding other people pay for my known illness. Why would they do that? Do I get auto-coverage to pay for pre-existing dents in my car? I probably could, but it would cost me more than fixing those dents myself.

Get coverage early, have medical savings plans, live healthily and accrue savings prudently. In other words, conduct yourself responsibly, and you’ll reduce the likelihood that you’ll be in such a state as to have no option but to ask other people to pay for your illness.

mr.blacksheep on October 12, 2009 at 5:04 PM

Get coverage early, have medical savings plans, live healthily and accrue savings prudently. In other words, conduct yourself responsibly, and you’ll reduce the likelihood that you’ll be in such a state as to have no option but to ask other people to pay for your illness.

–Blacksheep, I’ve been covered by employer group health plans for 30 years. My employer is being taken over by another company. If I’m terminated, once COBRA ends, I will be unable to buy individual coverage for my pre-existing conditions except under high risk plans.

Jimbo3 on October 12, 2009 at 5:55 PM

If they can’t afford it, there’s Medicaid or state high-risk pools.

–In Texas, the cost for my family would be about $2600/month under the high risk pool. (The premium depends on the plan purchased).

Jimbo3 on October 12, 2009 at 5:56 PM

If you want coverage for pre-existing conditions, you need to pair that with an effective individual mandate that makes it expensive for people to not have insurance.
Jimbo3 on October 12, 2009 at 12:06 PM

The real public policy pickle is this: How do you incentivize consumers to select cost-effective health care options without defeating the entire purpose of medical insurance, which is to protect people against sudden, expensive health care needs?

The problem with a mandate is that mandating insurance coverage, without forcing the consumer to internalize the cost of his care, results in dramatic overutilization of medical services. This is a huge problem in Massachusetts. They’re only on the hook for their $20 copay or whatever it is, so why not go to the doctor every time they get the sniffles? The result? Huge lines, care rationing, and spiralling costs.

I don’t purport to have all the answers, although I like the concept of high deductible plans for cutting some of that crap out. But this is a really, really tough issue, and not one I trust the Democrats to throw together to fulfill every leftist’s government takeover wet dream.

Outlander on October 12, 2009 at 6:41 PM

How about this, how about if the U.S. taxpayers have to provide your health care coverage for you, you don’t get to vote in elections involving national offices? (Conflict of interest, don’t you know.)

Knott Buyinit on October 12, 2009 at 8:28 PM

–In Texas, the cost for my family would be about $2600/month under the high risk pool. (The premium depends on the plan purchased).

Jimbo3 on October 12, 2009 at 5:56 PM

Well, since the health insurance industry averages about 3-4% profit margins after all costs are subtracted, it would seem that to them, the cost of insuring you is about $2500/month and they are making a net of $100/month. You say you’ve been covered under employer plans for 30 years. Well, did you save any money in case you needed to cover your own insurance? If you didn’t, why didn’t you? You know you have a pre-existing condition, so why didn’t you put money away just in case. If you did put money away, but wanted to use it for other things and are now disgruntled because you have to use it for insurance, you can either take your chances with no insurance or suck it up and pay the monthly premium.

I’m still not seeing any reason whatsoever why you should get some of my income to cover your health care costs.

venividivici on October 12, 2009 at 8:55 PM

–Blacksheep, I’ve been covered by employer group health plans for 30 years. My employer is being taken over by another company. If I’m terminated, once COBRA ends, I will be unable to buy individual coverage for my pre-existing conditions except under high risk plans.

Jimbo3 on October 12, 2009 at 5:55 PM

While I certainly sympathize with your predicament, and pray for the best for you, I echo veni’s sentiments.

Also, perhaps your situation is exacerbated by having employer-based insurance. Many of those who are currently numbered among the ‘uninsured’ were simply folks who, at the time of the survey, were waiting for their coverage at their new job to start. If you were to get your own insurance at a young age, before any pre-existing conditions had a chance to manifest (at least for the vast bulk of the population), then you wouldn’t have to worry about not getting insurance because of pre-existing conditions, would you?

In a free market, the pre-existing conditions exclusion would probably be a good thing, because it would encourage folks to join the insurance plan early, and thus spread the risk over a larger pool. Exclusion on the basis of pre-existing conditions is only bad in the stupid employer-based insurance structure we have now.

mr.blacksheep on October 12, 2009 at 9:49 PM

“Those guys specialize in tax shelters,” said Nancy-Ann DeParle, director of the White House Office of Health Reform. “Clearly this is not their area of expertise.”

Says the guys who underestimated the deficit by what? $2-3 trillion? Yeah, they are clearly the experts on accounting.

MannyT-vA on October 13, 2009 at 2:12 AM

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