Ex-Insurance Exec Sees Big Backlash to Healthcare Bill

Potter, who has been closely following the various healthcare reform bills, has testified before Congress about the legislative efforts. He sees little to be pleased about in the way that reform is shaping up, particularly in the Senate Finance Committee.

That committee’s bill is particularly important because it is serving as the basic architecture for Democratic reform efforts, with other bills to be reconciled with it. Under the bill, uninsured Americans would be mandated to purchase insurance through health insurance exchanges that provide a menu of choices. But the cost will be very unappetizing to many families, he says:

The insurers will be getting millions of new customers and billions in new revenue” Potter states. ​“But the kinds of cost levels I’m seeing for middle-income families will be out of reach. This isn’t well understood right now on Capitol Hill.

With the Senate Finance Bill, there’s a great danger of a public backlash when people find out that their healthcare is still unaffordable. And the people will be right to be angry. I think that we will see a great upsurge against the health reform bill if it looks like the Senate Finance version.

For example, a family of four making $54,000 — slightly higher than the national median — would be paying $5,300 a year plus carrying a $5,000 deductible under the ​“silver” level outlined in the Senate Finance Bill. (The Senate Finance Bill maintains varying levels of coverage based on income levels, one of the most objectionable features of the current system.)

The ​“silver” coverage thus requires $10,300 in annual healthcare payments because payment only kicks in after the $5,000 deductible. While families paying more than 12% of their income in premiums alone would be eligible for subsidies, a family in this situation would not be subsidized because the premium is fewer than 10%.

The net outcome, Potter says: ​“We could see middle-income families being forced to pay high premiums and the insurers walk away with more money than ever,” Potter warns.

Moreover, there are virtually no provisions in any of the two Senate bills or the three House bills that would restrain insurance companies from raising premiums, which have climbed 131% in the last decade. While America’s Health Insurance Plans, the industry’s trade group, has pledged to hold down premiums, none of the legislation provides a direct mechanism for enforcing that pledge or enacting real ost containment, says Potter. ​“There’s just very little to hold costs in line. It’s a big disappointment..”

The only mechanism that reformers see as potentially holding down premiums is the ​“public option,” or a publicly-run insurance company. Ideally, the public option would act to set a benchmark against premium increases in the for-profit sectors.

But Potter points out that some weak versions of the ​“public option” would force the public firm to directly compete with larger insurers who have already established a controlling share of the 94 largest markets across the U.S.

Not only would these variations of the public option find it hard to gain market share, but they would also be forced to mimic the marketing and ​“cherry-picking” (seeking to sign up the youngest and healthiest consumers while avoiding older and sicker people), much-hated practices of the for-profit industry. Even weaker, the Senate Finance Committee’s proposal for a public option is a set of state-level co-operatives that would offer only feeble competition to already-entrenched insurers.

A Medicare-style public option that offered doctors reimbursements about 5% higher than the current level could make inroads and offer a different model than the for-profit companies, Potter suggested.

However, under all the bills offered up to this point, enrollment would be limited. ​“It could be expanded in the future, but as for now, they would reach a relatively small part of the population,” Potter noted.

In the last couple days, some buzz has been generated by the concept of a Medicare-style plan that would be open to all Americans who chose to join. Called Medicare Part E (“E” for everyone), this idea has shown strong support in recent polls.

(The New York Times/​CBS News reported Sept. 25 65% of Americans back ​“the government offering everyone coverage in a government-administered health insurance plan – something like coverage that people 65 and over get – that would compete with private health insurance plan.” In the Oct. 20 Washington Post, a new poll showed 57% ​“having the government create a new health insurance plan to compete with private health insurance plans.”)

Significantly, the Part E idea has been championed not just by liberals like James Obertstar (D-MN) and James Clyburn (D-SC), but also by former public-option opponent Blue Dog Democrat Mike Ross (D-AR), who cited Americans’ familiarity with Medicare as changing his mind. ​“Before this year, few people had ever heard of the term ​‘public option,’ ” Ross said

(In light of the burst of enthusiasm for Medicare Part E, it is stunning to recall that key promoters of the public option like pollster Celinda Lake, while working hard to discredit the single-payer for ​“Medicare for all” approach, sharply dismiss the idea of drawing on Medicare’s popularity to push a reform agenda. Lake called Medicare ​“frighteningly flawed”. This notion was forcefully countered in Robert Kuttner’s Obama’s Challenge, where he argues, ​“Medicare, after all, is one of the Democrats’ crown jewels.”)

Potter is highly enthused about the Medicare Part E idea, but is skeptical at this point about how far it will get in Congress:

I think it’s a good idea, but what I see emerging is something that will cover many fewer people, but maybe with Medicare-style rates, plus 5% for doctors.

Unfortunately, I just don’t see the support for a Medicare-style plan open to everyone. If we do wind up with a version of a public option, it will initially cover many fewer people and exert less pressure on private insurers to hold down rates. But we may have a chance in the future to enlarge it.

Potter is deeply distressed by the lack of regulation of insurance company practices, apart from a ban on using pre-existing conditions to disqualify patients. (However in the Senate Finance bill, insurers can charge older patients up to four times as much as other consumers for the same insurance.). For example, there is no public process for settling disputes when an insurer refuses to pay for a treatment that physicians recommend.

Although the for-profit insurance industry is not well-liked by the public, it continues to exert massive influence on Capitol Hill.

“The industry forms alliances with big business, conservative ​‘free-market’ think tanks, and promotes the idea that they are a legitimate enterprise,” Potter says. ​“And then they ’ invest’ — and I choose that word carefully — in campaign contributions to get the legislation they want.”