Congress: Co-ops or triggers do not meet President Obama's principles for the public health insurance optionPosted on September 21st, 2009 by Jason Rosenbaum in Profits Before People
In his speech on health care to Congress, President Obama laid down a challenge of sorts to progressives.
He laid out his principles for what a public health insurance option or any other idea to replace it would have to accomplish. In my mind, he is asking us to prove to those writing the policy (the Senate Finance Committee right now, and the rest of Congress) how the compromises on the table - co-ops and triggers - would not meet his principles.
To my progressive friends, I would remind you that for decades, the driving idea behind reform has been to end insurance company abuses and make coverage affordable for those without it. The public option is only a means to that end — and we should remain open to other ideas that accomplish our ultimate goal.
But I will not back down on the basic principle that if Americans can't find affordable coverage, we will provide you with a choice. And I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need.
He repeated both principles twice. The goal of a public health insurance option in his mind is twofold: To offer Americans who can't find insurance an affordable choice and to end insurance industry abuses. Anything that doesn't meet both of those principles would fall short of what the President asked for.
So let's go through the two compromises on the table - state-based consumer-run co-ops and a trigger for a public health insurance option - and see if they meet both of those principles.
It's hard to see how co-ops would offer customers an affordable choice because the health co-ops that are in place right now do not offer customers affordable choices.
For example, Group Health in Washington, the nation's largest and oldest co-op, while admirable in many respects, still can cause medical bankruptcy for its customers:
Four days after filing [for bankruptcy], Eugene, a portly 50-year-old with a salt-and-pepper beard and large glasses, sat in their rambler on the south side of Tacoma and explained that their problems started in 2002, when he was laid off from a longtime job as a multimedia technician at Pacific Lutheran University. From 1984 until then, he had been covered by Group Health through his employer, and paid a small amount extra for his wife. As he scrambled to find work, first taking a graphic-design job at a sporting-goods store and then landing his position at KCPQ, he and his wife started paying for Group Health insurance out of their own pockets. The initial cost, he says, was $630 a month for them both.
The plan was a good one, charging them just $7 for an office visit and $5 for each medication. The drug benefit was crucial. He has diabetes and high blood pressure; his wife has rheumatoid arthritis, among other problems. Their medications would have cost $3,000 a month without insurance, according to Eugene.
But, he says, "They kept on raising our rates." In 2003, Group Health increased the cost of premiums in the individual market by 24 percent, according to figures from Kreidler's office. The rate hike was roughly comparable to those of the two other big players in the market, Premera BlueCross and Regence BlueShield. Over the following years, Group Health's average annual increase, 10 percent, was lower than Premera and Regence, but only by three to four percentage points.
Eugene's experience isn't atypical:
But evidence in Washington suggests Group Health customers are not enjoying lower premiums. "There isn't much of a marked difference in the price," says Krei-dler, who worked at Group Health as an optometrist for 20 years before running for public office. "If there were, everyone would have ended up joining [Group Health] years ago." Instead, just under 20 percent of the state's health-insurance patients belong to the organization.
Overall, Washington's insurance rates in the individual market (people buying coverage for themselves) are somewhat lower than the national average. But whether that is attributable to the presence of Group Health is debatable. Some states with no co-ops have even lower rates.
It's also worth noting that for-profit insurers like Blue Cross/Blue Shield started off as non-profit cooperatives and have ended up just like every other insurer in terms of cost and behavior. In fact, a Government Accountability Office study showed that health co-ops don't have the market share to hold down prices.
It's hard to see how co-ops would end insurance company abuses as well. As small, state-based, member-run organizations, they would not be able to force the large, national insurance companies to comply with regulations on a country-wide scale. On the local level, while they might be able to treat their customers better, they will be under intense competitive pressure from their private brethren to follow along with their money-saving bad practices like denying people for pre-existing conditions. They will either have to raise rates to compete or use these practices themselves.
To drive both points home, the Congressional Budget Office, in their letter to Senator Max Baucus on his bill [pdf], said co-ops wouldn't do anything of note, because they would be too small to compete:
The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.
WellPoint, one of the largest insurance companies, agrees. At a conference with Wall Street investors, WellPoint executives said that co-ops "exist already" and would not "change the landscape" of the insurance industry or be competitive:
We have many non-for-profits that we compete with in all of our states today…If you look at that environment, I'm not completely sure the value a co-op will bring, if it is truly a level playing field.
A co-op would have made sense if you're in an environment where you didn't have guaranteed issue and not having medical underwriting, but as you know, the industry, we've all said we're ok, we support guaranteed issue and we support not having medical underwriting, with enforceable mandates.
So in some ways, the co-op right now, it's very difficult for me to opine on how it will impact us. It's just another not-for-profit competitor. I'm not really sure how it changes the landscape, and I'm not sure it would be very competitive, because again, not-for-profits compete today, and we compete very well with them, we have greater market share than them already.
The verdict is in: Co-ops will not meet President Obama's principles for reform. There is no way they will control prices because all of our experience, both historically and in the present, says co-ops do not lower costs for consumers. The CBO agrees. And, given their small size, it is impossible to imagine these underpowered organizations will be able to end insurance industry abuses or keep the insurance industry honest.
A trigger for the public health insurance option would make the implementation of the public health insurance option conditional. So, unless the trigger would be triggered immediately, we would be waiting for conditions in our health care system to get measurably worse before implementing a solution, if indeed a trigger is ever triggered. (Given our legislative history with triggers, it seems likely that a trigger would never be triggered, so the trigger proposal is nothing more than a plan to kill the public health insurance option.)
President Obama thinks that the status-quo is unacceptable, so it's hard to see how delaying implementation of a public health insurance option fits with his principles for reform. If were talking about trying to head off a future health care crisis then a trigger might make sense, but everything the President says points to fixing the crisis we have now. Delay is not the answer Obama is looking for, especially if he agrees coverage is not affordable now. And it's not one Congress should accept, either.
But that's exactly how the trigger is triggered; it's based on affordability. Under the current proposal, if 95% of people can't find "affordable" insurance, then a public health insurance option would be created. Obama does not believe insurance is affordable now - he said last week that we spend more than anywhere else in the world, and these costs will eventually bankrupt the federal government - so why should Congress wait for insurance to become even more unaffordable to trigger a public health insurance option? And how does waiting for health care to become even more unaffordable meet his principle of providing affordable choices to people?
Setting a level of affordability that's worse than the status quo will only guarantee that insurance companies keep their prices at just below the level that would trigger a public health insurance option:
What the trigger does, in effect, is tell the insurance industry the exact bare minimum it must do to keep the status-quo. The insurance industry will undoubtedly step right up to that line but not cross it to avoid a public health insurance option in that state, and they will undoubtedly lobby to change the trigger minimum so they can keep up with their practice of turning your health into shareholder profits.
But more convincingly, it's impossible to see how triggers would hold the insurance industry accountable. Triggers for a public health insurance option would be based on affordability and competition benchmarks that have nothing to do with insurance company abuses.
Of course, Obama's plan is to outlaw bad practices. But, as he himself admitted, just outlawing might not be enough:
The insurance reforms that I've already mentioned would do just that. But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange.
As an example, the practice of rescission - taking away your insurance policy when you become sick - is illegal now. And yet, the insurance companies admitted before Congress earlier this year that the practice is common.
Regulations are viewed by business in this country as obstacles to be overcome, not rules to be abided by. In even the best regulations, loopholes will be found, enforcement will be spotty, and fines will be chalked up to the cost of doing business.
So, what are you, the patient, supposed to do?
If you had a choice, a choice which President Obama wants you to have, you'd be able to choose a public health insurance option that's governed by the common good, not Wall Street Profits, and thus abides by the regulations. If insurance companies could lose customers because they don't want to abide by regulations, they'll think twice before looking for loopholes. In this way, a public health insurance option keeps the insurance industry honest and ends insurance company abuses.
Under a trigger, there would be no public health insurance option, so you would not have a choice that looks out for your welfare, and insurers wouldn't abide by regulations on their bad practices. Some might argue that the mere threat of a public health insurance option sometime in the future would keep the insurers in line, but that would be true only if a trigger were triggered based on insurance company bad practices. Under the current proposal, a trigger would be triggered based on affordability standards, so there is no incentive to keep bad practices in check, only to keep their prices under a minimum threshold.
There is absolutely no way a trigger would function to keep the insurance industry in line, one of Obama's key principles. It will also tell the insurance industry the minimum they need to do in terms of cost control to keep away the public health insurance option, which is not a recipe for lowering costs. In short, I don't see how it meets either of Obama's principles. Congress should reject triggers.
Addressing Congress, the President spoke in favor of a public health insurance option. He also laid out his goals for the public option: To provide affordable choices to those that don't have them and to keep the insurance industry in line.
Neither of the "compromises" on the table would do either.
Co-ops have been proven through a long history not to have any effect on cost control, and their small size and market power makes it unlikely that they will be able to force insurers to play by the rules. Triggers allow the health care crisis to get worse before fixing it, so people who can't afford care now still won't be able to afford it after a bill with triggers is signed. And because they are triggered based on affordability concerns and not regulatory compliance, there is no way a trigger will do anything to hold to account an insurance industry dead set on increasing profits at the expense of our health.
Triggers and co-ops do not meet the President's principles. For these reasons, as well as a myriad of others, they should be rejected by the Senate Finance Committee and all of Congress.
By contrast, the public health insurance option would meet these principles (CBO says it would begin lowering costs, and it would provide competitive pressure to keep insurance companies playing by the rules). And the idea is popular. 77% of voters want the choice of a public health insurance option. That even goes for places like Arkansas. People boo when they hear Max Baucus's name and cheer for the public health insurance option. And Senators who stand up for the idea - like Jay Rockefeller of West Virginia - become champions for the cause. Even Bill O'Reilly seems to like the idea.
We have the votes to pass a public health insurance option in both houses of Congress. The only thing standing in the way is the insurance industry and their comprehensive campaign to kill health care reform.
The Senate Finance Committee should not pass the insurance industry bill - the bill Baucus has on the table now. They must pass reform that works for us and beats back the stranglehold the insurance companies have on our health.