Under Obama Plan, Health Premiums Would Rise

(from FoxNews.com 3/17/2010)
Insurance premiums are likely to keep going up even if the health care bill passes, experts say. If cost controls work as advertised, annual increases would level off with time.
WASHINGTON — Buyers, beware: President Barack Obama says his health care overhaul will lower premiums by double digits, but check the fine print.
Premiums are likely to keep going up even if the health care bill passes, experts say. If cost controls work as advertised, annual increases would level off with time. But don’t look for a rollback. Instead, the main reason premiums would be more affordable is that new government tax credits would help cover the cost for millions of people.
Listening to Obama pitch his plan, you might not realize that’s how it works.
Visiting a Cleveland suburb this week, the president described how individuals and small businesses will be able to buy coverage in a new kind of health insurance marketplace, gaining the same strength in numbers that federal employees have.
“You’ll be able to buy in, or a small business will be able to buy into this pool,” Obama said. “And that will lower rates, it’s estimated, by up to 14 to 20 percent over what you’re currently getting. That’s money out of pocket.”
And that’s not all.
Obama asked his audience for a show of hands from people with employer-provided coverage, what most Americans have.
“Your employer, it’s estimated, would see premiums fall by as much as 3,000 percent,” said the president, “which means they could give you a raise.”
A White House press spokesman later said the president misspoke; he had meant to say annual premiums would drop by $3,000.
It could be a long wait.
“There’s no question premiums are still going to keep going up,” said Larry Levitt of the Kaiser Family Foundation, a research clearinghouse on the health care system. “There are pieces of reform that will hopefully keep them from going up as fast. But it would be miraculous if premiums actually went down relative to where they are today.”
The statistics Obama based his claims on come from two sources. In both cases, the caveats got left out.
A report for the Business Roundtable, an association of big company CEOs, was the source for the claim that employers could save $3,000 per worker on health care costs, the White House said.
Issued in November, the report looked generally at proposals that Democrats were considering to curb health care costs, concluding they had the potential to significantly reduce future increases.
But the analysis didn’t consider specific legislation, much less the final language being tweaked this week. It’s unclear to what degree the bill that the House is expected to vote on within days would reduce costs for employers.
An analysis by the Congressional Budget Office of earlier Senate legislation suggested savings could be fairly modest.
It found that large employers would see premium savings of at most 3 percent compared with what their costs would have been without the legislation. That would be more like a few hundred dollars instead of several thousand.
The claim that people buying coverage individually would save 14 percent to 20 percent comes from the same budget office report, prepared in November for Sen. Evan Bayh, D-Ind. But the presidential sound bite fails to convey the full picture.
The budget office concluded that premiums for people buying their own coverage would go up by an average of 10 percent to 13 percent, compared with the levels they’d reach without the legislation. That’s mainly because policies in the individual insurance market would provide more comprehensive benefits than they do today.
For most households, those added costs would be more than offset by the tax credits provided under the bill, and they would pay significantly less than they have to now.
The premium reduction of 14 percent to 20 percent that Obama cites would apply only to a portion of the people buying coverage on their own — those who decide they want to keep the skimpier kinds of policies available today.
Their costs would go down because more young people would be joining the risk pool and because insurance company overhead costs would be lower in the more efficient system Obama wants to create.
The president usually alludes to that distinction in his health care stump speech, saying the savings would accrue to those people who continue to buy “comparable” coverage to what they have today.
But many of his listeners may not pick up on it.
“People are likely to not buy the same low-value policies they are buying now,” said health economist Len Nichols of George Mason University. “If they did buy the same value plans … the premium would be lower than it is now. This makes the White House statement true. But is it possibly misleading for some people? Sure.”

Why Health Insurance Is So Expensive

It seems like Congress will take a more measured approach to passing Health Care Reform, one that better includes views from both sides of the asile as well as those from people like me that aren’t on either side of the asiles. That’s a good thing.

I’d like to take a moment to talk about why Health Insurance is so expensive and why the currently approved legislation is sooo expensive and will increase cost. True, as currently written, some people with low economic abilities will have their premiums subsidized by the Federal Government. But for most of us the cost will go up?

Why is that? Becuase Health Insurance is expensive because Health Care is expensive. We can debate as to whether Health Care should be so expensive (I do not think it should be) but whether it should or shouldn’t be, there is nothing in this legislation that will make it cost less.

Health Care Reform, where people don’t get turned down or have their claims denied for pre-exisiting conditions and where they shouldn’t be charged a small fortune if they have any of these, is the RIGHT THING TO DO. However, that costs money. Why, because the insurnace companies will have to pay more claims and pay more money on the claims they do pay. If you owned a restaurnat and the Federal Government required you to give everyone that placed and order more food, would you charge more. Of course you would. And if the Government says you can’t charge more but you have to give more, you’d close your business, either by choice or by economics.

Health Care Reform isn’t new. Back in 1998 the Federal Government passed a law called HIPAA. Most people are familiar with HIPAA because of the privacy statements you now have to sign at your doctors office, but HIPAA also contained a mini-Health Care Reform provision, one that said if you change employers and have a pre-exisiting condition and you had health insurance under your old employer you would not have to satisfy a new pre-exisitng condition exclusion. A very good idea. But guess what, it meant the insurance companies would have to pay more claims and pay more money on the claims they were paying anyway. When I ran the SE Underwriting shop for Aetna I priced out the impact of HIPAA for Aetna. The estimate was a one time bump up of 8% (to be felt over 2 years) and an annual additional increase of 2%. That doesn’t sound like much, but 12 years later, the 8%+2% means health insurance for small businesses and many individuals is 33.6% more expensive than it would have been.

I don’t know a single business owner or person who is happy with the cost of Health Insurance but I’ve almost not met a single person that understands the mini-Health Care Reform of 1998 is in large part responsible for the high Health Insurance Cost today. It should not be a surprize to any American except for the fact that it’s s not carried on CNN or FOX.

Last world on Health Insurance Cost. Most all insurance companies are regulated about how much money they must pay out and how much they can keep. If you have individual health insurance the number is close to 75% must be paid out and if you are with a very large employer (say 500+ employees), about 85% is paid out. You might not like those numbers but they are not new. So when Health Insurance Premiums increase, the % the insurance company pays out or keeps is the same. If you have any facility with math whatsoever, this should tell you that without changing the cost of Health Care, Health Care Reform, in its current format, will only make costs and therefore premiums, even higher.

State of The Union Speech and Health Care Reform

Tonight will be a significant evening in the path to Health Care Reform. What will President Obama do? Will he focus on jobs? Will he talk new stimulus? Will he prep us for his Budget Speech on February 1st? What will he say about Health Care Reform. I’ve got to be frank with everyone and tell them that I’ve met nearly no one that is against Health Care Reform. I’ve also met no one that is for Health Care Reform as recently passed. They do not think now or even later are good times to raise taxes and to raise them so significantly. And not only are they upset that taxes will be raised, they are upset that both Health Care and Health Insurance costs will go up across the board. You know that Congress is talking about adding a 1.6% tax to insurance companies which means insurance companies will raise premiums by 2.13% to compensate for this (they need to maintain their normal profit margins which is why the final number higher). Plus, part of the bills want to tax many health care services by another 1.6%. Believe me you, that addtional 1.6% will be passed onto the insurance companies who will pass it on to you and me in the form of higher premiums. Folks, Health Care Reform is absolutely critical for our great country, but increasing the cost of Health Insurance is not the answer. Remember, Health Insurance in the USA is expensive because Health Care in the USA is expensive, not the other way around. Thanks for listening!~