Health insurance industry fires warning shot at health care reform
I really don’t have time to do an in-depth article about this, but I have to give it mention. In what
appears to be the first move of the health insurance industry not playing nice with health care reform. They have released a report that is not nice at all, concerning the effects of the health care reform legislation about to be voted on by the Senate Finance Committee.
Even though the company that produced the report has acknowledged that it did not examine all aspects of the legislation, looking only at certain portions, it is clear the insurance companies are about to engage Congress and President Obama in full battle gear. The chief lobbyist for the health insurance industry did not rule out attack ads against the legislation. From The Associated Press:
Democrats and their allies scrambled on Monday to knock down a new industry-funded study forecasting that Senate legislation, over time, will add thousands of dollars to the cost of a typical policy. “Distorted and flawed,” said White House spokeswoman Linda Douglass. “Fundamentally dishonest,” said AARP’s senior policy strategist, John Rother. “A hatchet job,” said a spokesman for Senate Finance Committee chairman Max Baucus, D-Mont.
But the health insurance industry’s top lobbyist in Washington stood her ground. In a call with reporters, Karen Ignagni, president of America’s Health Insurance Plans, pointedly refused to rule out attack ads on TV featuring the study, though she said she believed the industry’s concerns could be amicably addressed.
At the heart of the industry’s complaint is a decision by lawmakers to weaken the requirement that millions more Americans get coverage. Since the legislation would ban insurance companies from denying coverage on account of poor health, many people will wait to sign up until they get sick, the industry says. And that will drive up costs for everybody else.
Insurers are now raising possibilities such as higher premiums for people who postpone getting coverage, or waiting periods for those who ignore a proposed government requirement to get insurance and later have a change of heart.
The drama threatened to overshadow Tuesday’s scheduled vote by the Senate Finance Committee on a 10-year, $829-billion plan that Baucus has touted as the sensible solution to America’s problems of high medical costs and too many uninsured.
The main concern the insurance companies seem to have over the legislation stem out of how many people would actually be forced to purchase health insurance. They are saying it is not enough and that the end result will be higher premiums for those who already have coverage, possibly as early as 2013, when the plan goes fully into affect. As has been stated earlier on this blog, it is really difficult to predict how all of this is going to go down. There are too many variables to consider.
There is one thing that I have not mentioned thus far and that has to do with the way Congress intends to collect enough money to subsidize coverage for those Americans who can not afford the entire cost of their health insurance. Heretofore, I did not realize they were planning to levy a tax on health insurance companies to help pay for that subsidy. Having learned that this morning, I have to wonder if that is the right move to make.
It’s not that I want to protect health insurance companies, but am I the only one that wonders how these companies will recoup the cost of this tax? Is Congress really so naive that they believe the insurance companies will just eat the tax and go merrily on their way? If they are, then they really need to be voted out of office. Let me explain how this will work. Congress levies the tax to the insurance companies and they will pass it down to their end consumer, plain and simple. So the real victims here is going to be those who purchase health care insurance from those companies. They are the ones who will be paying this new tax, not the insurance companies. That’s you and me, folks and for anyone to believe otherwise is delusional.
I think we had best buckle our seat belts because this debate is about to get really interesting.
The health care reform debate does seem to go round and round but at least we’re now discussing real issues having gotten past the death panel stuff. The insurance industry is protecting its turf and it’s hard to blame them; but it’s just more noise that needs to be shut out while the big picture is drawn.
The issue of taxing “Cadillac” insurance plans is a simple tool for raising revenues. Whether it’s the best tool or not is arguable but it will be effective. The plan imposes a 40% tax on the insurance company for premiums in excess $21,000 for a family plan. So if your company pays $25,000 for your plan they will report $4000 as taxable to the insurer who will then have to pay over $1600 to the IRS. As you noted Larry, your company may simply increase the employee contribution to his/her plan to cover the tax. But what is much more likely to happen is that employers will negotiate a less expensive plan with the insurer reducing your benefits and the cost of the plan down to $21,000, and in exchange the employer will increase your salary by $2500 and remit payroll taxes (and you’ll pay income taxes) on that amount. In fact, the bulk of the money the government expects to collect by imposing this “Cadillac” tax comes not from the tax but from increased payroll and income taxes.
My concerns are with the lack of attention paid to reducing spiraling medical costs. It’s been pointed out many times that this debate has not been about health care reform but about health insurance reform. We’re missing the boat by not focusing on cost control and I’d like to see somebody take that issue to heart.
I think my head is about to spin off, Mike. Hopefully, we will be able to see some good come from this after all is said and done.
It looks like the Baucus plan has passed the Senate Finance Committee, so it may be on the floor for debate sometime next week. I think it is a good thing for us to move forward on this and allow the American citizen to see what is in the legislation.
Reserving my head spin move for next week- I read today that Harry Reid will combine the Finance committee will more liberal provisions for the eventual bill that will be debated on the floor. Can hardly wait to see what actual form takes shape before the full Senate debates it..
I’m wondering Larry just how much of the bill we will see and just how much will be understandable. I thinks the guts of the bill will be drawn up behind closed doors in those once smoke-fill rooms where cloulds of deception still hide the truth. This thing could very well pass in a form that not agreeable to most in this country.
Ron Russell´s last blog ..The Obama Supporter
Yeah, there is no telling what the final bill will look like. With floor debate coming up next week, the dust should really get stirred up now.
I just found your blog. My compliments on design and content.
I think the Cadillac tax will be evaded by many, and will collect little of the projected revenue for which it is designed. I agree with the first commenter, who said that employers will change plans to compensate for the tax. Failing that, they’ll pass it on to everyone else in the form of higher premiums. However, I do not believe that increased payroll taxes will be a counter to any losses. Not all employers pass on savings in health insurance to employees, and the percentage of the insurance tax vs. payroll tax don’t add up in my eyes.
This is reminiscent of the luxury tax in the Reagan years. Reagan compromised with the Dems and passed a luxury tax on items such as private planes and yachts. The result was that those industries collapsed, leaving thousands out of work. In the end, they government lost money on the tax due to unemployment benefits for the displaced workers.
Increased taxes usually create additional problems, because people find ways to legally evade them.
Thanks for stopping by Political Realities, Matt. I appreciate you taking time to comment on the article.
If there is one thing we can believe about Congress and any legislation they pass, it is the idea that nothing will work as designed. By the time health care reform legislation reaches the White House for the President’s signature, it may be in a completely different form. Whatever form it has, it is sure to be complicated. I am afraid the end result may be very unfriendly to the average American citizen.
We all know that a tax on insurance companies is really a tax on the people who buy health insurance, congress knows this but they hope that enough Americans are too naive to understand that the costs will be passed down.
I just wonder what changed? The insurance companies had been silent until now.
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I’ll tell you what changed, Mr. Pink Eyes. The insurance companies just figured out that they are not going to get every American into the coverage they sell and that the penalties for failing to purchase health care may be small enough that people will just ignore them. They have said all along that the only way they can reduce premiums is for every American to be in their policies. They see that may not happen and they are coming out swinging.
This issue is quite complicated and simply not something that can be resolved overnight. Personally, I like Sen. Lieberman’s position where he encourages Obama to take incremental steps instead of one giant leap.
Ideally, tort reform; fixing Medicare and Medicaid; and allowing people to buy their insurance beyond state lines would be the first plan of attack. Then, find ways to insure people who cannot afford insurance before looking at people who aren’t insured.
I also think that this whole issue is a back door for illegal immigration. As courts have ruled in the past that children of illegals have “equal access” to schooling, they’ll apply that law to illegals too.
Matt Keegan´s last blog ..Lacking Fresh Product, Chrysler Pushes Minivans
I hope you are wrong on the issue of illegal immigrants, Matt. It will be a stab in the back to legal immigrants and the American citizen if that takes place.
Quick question on the illegals: They should not get the benefits of Americans in the form of subsidies, for certain. But wouldn’t we want to see as many as possible buy into the system, to cut down on the billions-in some states, trillions-of dollars a year in unpaid medical costs? Of course, this assumes the affordability issue, but states like California are literally going broke trying to shoulder the burden of medical costs for illegals. If the government isn’t going to do anything to remedy the situation (and we haven’t in three decades), wouldn’t we at least want to mitigate the damage?
No one has been able to answer the real question with respect to the health care debate, which is:
“What real purpose is there in having a purely profit motivated 3rd party in the health care system between the doctor and his patient?
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I am tired of the Obama Administration and Democrats sugar coating this reform bill. They are in such a hurry to pass it without even thoroughly reading it through. This paired with every other failing government run entity is a huge red flag. It seems the government is more concerned with a take over of health care than actually thinking through a system that works. How else do you explain Nancy Pelosi voting down the 72 hour waiting period to review the bill? They know it is a step in the direction of single payer. Obama himself is caught on video stating “I am a proponent of a single payer universal health care plan!”.
Who is this man fooling?
Senator DeMint and Republicans proposed many health care bills over the last several years. Many of which would bring down premiums making health insurance more affordable for people. How about a $5000 tax credit in your Health Savings Account to pay for premiums? How about making insurance portable through out each state? Yep, many good ideas all of which were turned down by the majority of Democrats and Obama himself! Wake up people!
How the Obama Administration plans to pay for this bill should be very interesting. Keep your eyes open because it is easy to get lost in the “fluff” of these politicians!
Remember, none of the empty rhetoric matters until the Senate has a crack at the bill!
Jeremy´s last blog ..Are you up to date with the Health Care Reform?