Die Insurance Companies, Die

Insurance companies oppose reform that will substantially reduce their profits?  And they say it will increase premiums and force health care costs higher? I thought that insurance companies were looking out for my best interests, not their pocketbooks!  This surely will be the report that kills health care reform for good, since you know, insurance companies really know how to take care of people.

Is this seriously news?  I mean come on.  Who in their right mind thought insurance companies wouldn't do everything in their power in order to keep their profits at record highs?  This is like tobacco companies releasing reports that there is no connection between smoking and lung cancer.  The least the insurance companies could do is tell the truth though.  Let's see if they in fact did that.  The answer might surprise you.

Most people would assume that people will react differently to a new policy, right?  Well AHIP and their accountants at PriceWaterhouseCoopers don't think that way.  A crucial problem with their report is that it assumes no behavioral changes in response to new policies.  In the world of this report, insurance companies would go bankrupt due to taxes, but as Ezra Klein illustrates, this report doesn't operate in the real world.

The tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don't build it into their estimate. On Page 6, they say, "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed." That's a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.

Also, according to AHIP's report, health care costs have apparently become a constant, in that every dollar that a public program cuts from its payments to hospitals is a dollar the private health-care industry has to add to its reimbursements to hospitals.  As Klein states, this is simply untrue for any industry. Companies don't shift their cost burdens on customers because one company cut their costs.  That just doesn't happen in the real world, but apparently it does in the bizzaro world of insurance companies.

AHIP's report has one more fatal flaw and implausible claim according to Jonathan Cohn.  

By 2016, even some of the least generous plans offered through insurance exchanges would be subject to the new excise tax on high-value benefits. In other words, within a few years, the tax won't apply only to "Cadillac plans." It will apply to Chevys and maybe even some Kias, too.

But again, this claim is proven false and horribly misleading.  In order for AHIP and PWC to come to this conclusion, they assume that premiums in some parts of the country would be double the national average. But in fact, there is no data to suggest that this could ever happen.  In the real world, premiums exceed the national average by, at most, around 20 percent. The thought that this somehow could explode during a period in which reform will likely produce more nationalization of practices, is pretty hard to swallow.

So it has come to this.  Insurance companies have begun to use the same tactics of tobacco companies.  Sure shows you how much they care about the health and well being of their customers.