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A Project of The Annenberg Public Policy Center

A Premium Freeze? Don’t Believe It.

In defense of House members who are under attack for supporting that body’s health care bill, two liberal-leaning organizations are on the air with ads that go overboard in describing the wonders of the legislation.

Americans United for Change and a labor union, the American Federation of State, County and Municipal Employees, say they’re spending $1.7 million to run the cookie-cutter spots in 13 congressional districts where lawmakers have been hit with attack ads from the U.S. Chamber of Commerce and the 60 Plus Association.

It’s true that insurance companies weren’t happy about the bill, as the ad tells us. But do they "know the reform bill would stop them from raising premiums"? We doubt it, because it’s not true.

There’s nothing in the House legislation (or the Senate bill, for that matter) that bars insurance companies from raising their premiums, explicitly or as a practical matter. As back-up for its statement, Americans United for Change sent us a citation of a section of the House bill that would require insurers to submit a justification for any premium increases to the secretary of Health and Human Services and also post it on their company Web sites. The section also says that "a pattern of excessive or unjustified premium increases" should factor into states’ decisions about which insurers they allow to participate in the exchanges through which many people are expected to buy policies.

But that provision simply calls for more transparency on the part of insurers, and raises the possibility of exclusion from a state’s exchange if their justifications fall short. We don’t know if that will keep premiums lower than they might be otherwise, but it certainly won’t halt all increases.

Americans United for Change also cites work by Jonathan Gruber, an MIT economist, who has said his analysis of the House bill shows that families buying non-group insurance would save $1,260 a year, and individuals $470, without subsidies. Those figures are compared with what premiums are expected to cost under current law in 2016. According to Gruber:

Gruber, Nov. 2, 2009: The premiums that individuals will face in the new exchanges established by this legislation are, according to the non-partisan Congressional Budget Office, considerably lower than what they would face in the non-group insurance market, due to the market reforms put in place by the House plan, the mandate on individuals to participate regardless of health, and the market economies of new exchanges.

Gruber lists some factors that would have the effect of limiting premium rates for individuals buying insurance on the exchanges. But he doesn’t say there won’t be any rate increases.

There are plenty of provisions in the bill that might make insurance companies nervous or unhappy; the legislation is certainly a change from the status quo. But the notion that it will "stop" insurers "from raising premiums" isn’t one of them.