White House Says Insurance Group Study is Akin to Study of What the Earth Would Look Like Flat

By Lindsey Ellerson

Oct 13, 2009 11:18am

Jake Tapper and Sunlen Miller report:

The White House received some ammunition Tuesday in its efforts to discredit a health insurance industry study critical of a Senate Democrat's health care reform bill — from the accounting firm that conducted the study.

In a statement, the accounting firm PricewaterhouseCoopers seemed to acknowledge the deficiencies of its own study, prepared for America’s Health Insurance Plans, which suggested average family health insurance premiums would increase by approximately $4,000 a year if the legislation being voted upon in the Senate Finance Committee today were to become law.

PricewaterhouseCoopers was asked "to prepare a report that focused on four components of the Senate Finance Committee proposal," the group's statement said.

Those four components:

"IInsurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement; An excise tax on employer-sponsored high value health plans; Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers; (and) New taxes on health sector entities.The analysis concluded that collectively the four provisions would raise premiums for private health insurance coverage."

The PWC statement notes that the report itself acknowledges it did not estimate "the impact of the new subsidies on the net insurance cost to households" or "other provisions in health care reform" which, if "successful in lowering costs over the long term,…would offset some of the impacts we have estimated.”

One such provision, a proposed excise tax on expensive "Cadillac" plans, is intended to encourage businesses and others to seek less expensive coverage, thus lowering costs.

The PWC study states that it factored in the tax but not any anticipated behavioral changes:

"We have estimated the potential impact of the tax on premiums," the study says. "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is applied."

Nancy-Ann DeParle, director of the White House Office of Health Care Reform, told ABC News: "Not only does (the study) not assume (any behavioral changes resulting from the tax) but it says, 'Most people think that there would be behavioral changes and these plans wouldn’t exist anymore, however, we will just assume the opposite and we’ll spread the cost around and see how much it raises premiums.'

"That's like saying, 'Most people think the earth is round but if it is flat, here is what it would look like,'" DeParle continued. "And it just seems a little ludicrous to us."

AHIP president and CEO Karen Ignagni, asked about this issue yesterday, told ABC News, "One of the most important things that should be done is for PricewaterhouseCoopers, a world class firm, to speak for itself about methodology."

But, she said, regarding Cadillac plan taxes, "that’s a very good example of how all the factors PWC is pointing to in its report add up to actually pushing people to the Cadillac levels faster. The conclusion of this report is in fact that individuals with the bronze package, the lowest package, would in fact reach the Cadillac level far faster as a result of these factors not being attended to."

-  Jake Tapper and Sunlen Miller

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