US Health Insurers Up the Ante

Reprinted from Consortium News

The chutzpah shown by the U.S. health insurance industry in taking aim at the weakest reform bill in Congress – the one approved by the Senate Finance Committee – reflects the insurers' sense that they have beaten back other proposals that might have represented significant threats.

Not only was a national single-payer approach never allowed on the table – since it would have been the death knell for the private industry – but even the most “robust” public-option bills contain major concessions to the insurers, including sharp limits on who could qualify for a government-run program and delays on when the new program might take effect.

Perhaps the most striking passage in the House Ways and Means Committee's 1,018-page bill – regarded as one of the most liberal – is the definition of “Y1,” year one when an insurance “exchange” with a public option would become available to individuals and small businesses.

“The terms ‘Y1', ‘Y2', ‘Y3', ‘Y4', ‘Y5', and similar subsequently numbered terms, mean 2013 and subsequent years, respectively,” the bill states on page 14.

In other words, even if Congress approves a public option, the health insurance industry gets more than a three-year reprieve before it would have to begin competing and then the competition would be limited to small businesses and to individuals.

It also means that Americans facing a health-care crisis today can't expect meaningful help on health insurance until 2013. In the meantime, they are to be left to the mercies of private insurers.

The industry also won a major concession when Democrats agreed to exclude large companies as possible enrollees in the public option.

At the start of the congressional debate, Republicans cited an industry-backed study from the Lewin Group warning that if a public option were approved, an estimated 119 million Americans might defect from private plans. That, in turn, might badly damage the profits of the health-insurance industry.

Or as Sen. Chuck Grassley, R-Iowa, put it in a column for Politico.com, the exodus of so many customers would “put America on the path toward a completely government-run health care system. " Eventually, the government plan would overtake the entire market.”

So, Democrats made moves to protect the industry. Rather than a public option available to everyone, including large companies that are currently struggling to pay health-insurance premiums for their workers, the public option would be allowed only for individuals and small businesses. Private insurers would get to keep the biggest and most lucrative part of the market, the large companies and their employees.

Based on that concession, the non-partisan Congressional Budget Office estimated that the number of Americans who might sign up for a public option was about 10 million, a much smaller threat to the private insurers.

The time horizon for the public option also began fading into the fairly distant future. To minimize attacks on the 10-year cost of the program, Democrats pushed the starting point for the exchanges, where private insurers supposedly would compete with the public option, back to 2013.

The delayed implementation pushes higher costs for health reform outside the 10-year window (and thus makes the program look cheaper), but it means that Americans can expect little improvement in their health-insurance coverage for the next three-plus years. [To see the expected annual costs of the Ways and Means bill, go to the CBO analysis and look at the table on the last page.]

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