While the medical insurance companies seemed to be on board for health care reform, they recently commissioned and released a study that seems to be a shot at this reform. This study alleges that there will be a 111% increase in premiums from 2009 to 2016 if the Baucus plan passes. Of course, insurance premiums somehow always seem to increase, so the projected increase without the plan is 79%. The folks in the Congressional Budget Office take issue with the numbers presented by the industry study.
One obvious problem is that both the folks in industry and the folks at the CBO are interested parties in this matter. This does not entail that they are mistaken (though at least one of them must be), but it does provide reasonable grounds for being suspicious of their claims. While some experts have taken issue with the industry numbers, all of the speculation is just that-speculation. While some intelligent estimates can be made about future premiums and how they will be impacted by this or that, such predictions must be taken for what they are.
Of course, the industry claim that rates will increase can be seen not just as a prediction but also as something of a threat. I’ll run through the logic. As noted above, the industry seemed to have been on board with the plan, but dropped this bomb at the last minute. I suspect that the industry was on board with the part of the plan that required everyone to have insurance. After all, what industry would be against a plan that mandated by law that people would have to buy their product? Of course, the plan also required that insurance companies insure folks that have pre-existing conditions. Currently, insurance companies do not generally do that-after all, you don’t make much profit on insurance selling it to folks who will almost certainly need to use it. As far as I can tell, they were willing to make a trade-off: they would insure those with pre-existing conditions in return for the guarantee of all those new, legally mandated customers. Presumably a little number crunching revealed that the loses from insuring those with pre-existing conditions would be nicely offset by these new customers.
Of course, while people would be legally required to buy insurance, the current plan allows a way out. If someone does not buy insurance, then she must pay a penalty to the federal government. While this penalty is significant, apparently it is not harsh enough to ensure that enough people (from the standpoint of the insurance folks) will purchase insurance rather than pay the penalty. After all, some people chose to go without insurance now and presumably some of these folks would make the same choice if the penalty was sufficiently less than the cost of insurance.
If enough people elect to take the penalty rather than get health insurance, then the industry will not (as they see it) have enough new income to offset the loss of insuring those with pre-existing conditions. As such, the reason for the last minute dissent is evident.
As a final point, I find it interesting that they are effectively telling us this: “If we don’t get what we want, we’ll jack up your rates 111%. If we get what we want, the jacking will only be 79%. You get jacked no matter what, but you should be used to that by now.”