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Insurance Lobby Group Says Plan Would Spike Costs

ROBERT SIEGEL, host:

The industry study that Julie Rovner referred to was conducted by the accounting firm Pricewaterhouse Coopers and it estimates that if four provisions of the Senate Finance Committee bill become law, insurance premiums would go up much faster than under the present system.

Over the next four years, they estimate a 40 percent increase as opposed to a 26 percent increase. Over the next 10 years, they say, a 111 percent increase as opposed to a 79 percent increase. Well, those numbers were pounced on by some advocates of health care reform. The White House called the study distorted and flawed. AARP called it a hatchet job. Senator John Kerry of Massachusetts seized on the report today as evidence of the insurance industry's intentions.

Senator JOHN KERRY (Democrat, Massachusetts): It's a powerful argument, frankly, for why we ought to have a public plan. And it's a powerful argument for the attitude of an industry towards this effort. There's an old saying that if you're not part of the solution, you're part of the problem.

SIEGEL: Well, by that reasoning, we have a very problematic guest with us right now. Karen Ignagni is president of America's Health Insurance Plans, AHIP, of the trade group that commissioned the Pricewaterhouse Coopers report. Welcome to the program once again.

Ms. KAREN IGNAGNI (President, America's Health Insurance Plans): Thank you so much.

SIEGEL: First, is your reading of this report that if a bill like the Senate Finance Committee bill becomes law, then everyone's premiums will cost a lot more than they would cost if no bill at all were passed?

Ms. IGNAGNI: It is. And the reason for that is that if we don't have everybody into the insurance pool, it will be a strong incentive for the younger and healthier people not to purchase coverage. Costs will to soar for those who remain in the market. Our position is very clear: We strongly believe in health reform, but we need to get everybody in and we need to make cost containment a major part of this effort.

SIEGEL: But Pricewaterhouse Coopers, the firm that did this study, issued a statement in which they say they considered four elements of the Senate Finance Committee proposal and they added up, I'm quoting now, the reform packages under consideration of other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households.

Then they go on to say, also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts that we have estimated. They seem to be saying, we looked only at some factors and this is a very high side estimate as a result.

Ms. IGNAGNI: Actually, there are a number of other firms that have looked at what happened in the states. So, this projection is very much in line with that body of evidence, number one. Taking the subsidy point, number two, 42 percent of people who are going to - who are now in the individual market have incomes much higher than the subsidy levels, which is 400 percent of poverty.

SIEGEL: Of the poverty level.

Ms. IGNAGNI: If you have a constant spiraling up because we are financing this legislation through additional taxes and fees, it's a ratcheting up of the cost of those subsidies. So, our point is that let's focus now on getting everybody in and then let's focus on the cost so that we can make sure this is affordable in the end.

SIEGEL: Tell me if I have this right. The thing that worries your group, the big health insurance companies, about the Senate Finance Committee bill is that the penalties that people would pay for remaining uninsured are not as great as they were in a prior version of the bill. And therefore, you think that more people who are uninsured now would remain uninsured and not increase the pool of those who would be contributing premiums into your companies.

Ms. IGNAGNI: I think that a number...

SIEGEL: But do I have that right, though?

Ms. IGNAGNI: Yes, you have it right. In the Senate Finance's latest proposal, there is no penalty in year one, a de minimis penalty year two, et cetera. And we think that there are a number of other ways to get everybody involved. If politicians feel they can't go down the penalty route, we've been working very hard with members of Congress to identify alternatives.

SIEGEL: But just to deal with the penalty route for a moment, if indeed the penalty that people would have to pay for not getting health insurance were up at around $3,000 a year or so, and we're talking about people with incomes of $40,000 a year, you'd be asking of the Senate Finance Committee to pass the equivalent of one of the hugest tax increases on middle income earners in America that we've seen in ages.

Ms. IGNAGNI: Well, that's why I listen very carefully to what the Senate Finance discussion was and we have been very busy on identifying alternatives to penalties. So I understand your point is a very legitimate one. I heard the debate. We need to make sure that everyone is in. We need to do that in a reasonable, but effective way.

SIEGEL: The Pricewaterhouse Coopers report contrasted the Senate Finance Committee bill with the system unchanged as it is right now. Do you assume that the system will be changed after this session of Congress?

Ms. IGNAGNI: It needs to be changed.

SIEGEL: It needs to be changed. Just the possibility of the outcome from the 1990s that there would not be any health care...

Ms. IGNAGNI: I don't see that happening at all.

SIEGEL: It doesn't seem at all likely.

Ms. IGNAGNI: I don't see that happening.

SIEGEL: Well, Karen Ignagni, president of America's Health Insurance Plans, a big industry group here in Washington, thank you very much for talking with us.

Ms. IGNAGNI: Thank you. Transcript provided by NPR, Copyright NPR.

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