A Project of The Annenberg Public Policy Center

Another Salvo from the Insurance Industry

Just a few days after the release of an insurance industry-backed study that found premiums would go up under the Senate health care bill, another industry-backed report has been published. Both reach the same conclusion about premiums. Both fail to take into consideration certain cost-saving measures in the Finance Committee bill. And both acknowledge that.

In an earlier Wire post, we explained some of the limitations of the first report, drawn up by PricewaterhouseCoopers for the trade group American’s Health Insurance Plans and then flagged as a less-than-adequate evaluation of the bill by PwC itself. The newer study was conducted for the Blue Cross Blue Shield Association by the consulting firm Oliver Wyman, which also says its findings on premiums would be different if it factored in other aspects of the bill:

Oliver Wyman report for BCBSA: We estimate that without strong individual mandates, average annual medical claims in the reformed individual market five years after reform are expected to be 50 percent higher compared to today, not including the impact of medical inflation. This would translate into premium increases of approximately $1,500 for single coverage for a year and $3,300 for family coverage in today’s dollars for people purchasing new policies. Subsidies will entirely or partially offset these premium increases for some individuals. Eight million current individual market members and 25 million uninsured earn between 100 and 400 percent of the federal poverty level and will have access to subsidies through the exchange.

The report says it included the subsidies in the bill among its considerations, but then says it didn’t calculate the effects of the subsidies on average premium costs. Oliver Wyman also doesn’t include the impact of the insurance exchanges in its model, saying it doesn’t think they make any difference in costs. But it notes that the nonpartisan Congressional Budget Office disagrees, finding "that exchanges could reduce premiums by 4-5 percent in the individual health insurance market."

The main beef in the report is that the bill’s individual mandate must be backed up with a strong enforcement mechanism in order to bring the young and healthy – not just the sick and older populations – into insurance risk pools. Those healthier folks bring overall premium costs down. We have no objection to that general argument, and independent experts on this subject agree that an enforceable individual mandate is needed to reach at least near-universal coverage. And, as MIT’s Jonathan Gruber recently told Business Week magazine, a heftier penalty in the Senate Finance bill would bring more of the uninsured into the fold. It’s debatable whether the bill’s $750-per-adult penalty in 2017 is sufficient to prompt enough of the healthy folks to get coverage. 

But we have plenty of skepticism for industry-backed reports that examine elements the industry doesn’t like, while discounting aspects of the bill that could soften their conclusions. It’s also worth noting that Gruber’s recent estimates on the bill contradict the insurance companies’ findings, showing that premiums in the individual market would go down on average, compared with where they’d be without the legislation.