Perhaps CNN’s in-house doctor, Sanjay Gupta, ought to stick to things medical. Gupta’s attempt to explain John McCain’s health plan offered a confusing and ultimately misleading picture of how the candidate’s proposals might work. McCain, you may recall, has proposed giving every family a $5,000 tax credit and every individual a $2,500 credit to help buy insurance policies in the commercial market. So it was reasonable for Gupta’s show to ask: How far will five grand really get you? Too bad it didn’t answer the question.
Gupta began by citing a study done a couple of years ago by America’s Health Insurance Plans (AHIP), the insurance industry trade association. Gupta was wrong at the outset when he called AHIP “the largest provider of health insurance.” AHIP is a lobbying organization for its insurance company members. It does not—does not—provide health insurance. Gupta said AHIP had found that the average family’s premium was $5,799; he didn’t say that the data had been collected two years ago, and he didn’t explain that any study done by an insurance trade association is necessarily of limited value. (In fact, no organization has adequately studied the so-called individual market, where McCain wants people to buy their policies with his tax credit.) The take-away for viewers, though, was that a family could buy a policy for the amount offered by McCain’s tax credit.
Gupta did note a couple of other caveats, but missed the mark in explaining them. He reported that premiums vary depending on where you live, saying that family premiums cost about $16,000 or so in Massachusetts and $3,000 in Wisconsin. That allowed him to segue into McCain’s proposal for letting insurers sell across state lines—in effect, picking and choosing states with lax business regulations. The implication was that you might be able to buy a cheap policy in Wisconsin if McCain’s plan became law. But people in Massachusetts might have better consumer protections than those in Wisconsin, which they might lose in their quest for cheaper premiums. Gupta didn’t talk about that.
He did say that the premium “depends on the individual in terms of pre-existing conditions. These health care costs can vary widely if you’ve had some sort of illness before.” Premiums (not health care costs) might increase 50 percent or more if an insurer offers a policy at all. But the main point is that many sick people don’t get coverage in this market. Gupta skipped right over it.
Instead he jumped into territory he should have avoided—a comparison of the individual market and the employer market, where most people get their insurance. He told viewers that another organization, Kaiser (Kaiser Family Foundation), says that the average family premium from employers is around $12,000 a year, much higher than the $5,800 cited in the insurance industry study. Gupta gave this reason:
When an employer covers people they pool a lot of people together, people who are otherwise healthy and people with pre-existing conditions and that does tend to drive up cost.
I asked a neutral insurance expert, Paul Fronstin, who directs research for EBRI, the Employee Benefit Research Institute, to translate Gupta’s wonk talk. Fronstin said Gupta “gives a gross oversimplification” that “implies that the individual market is filled with healthy people, and that’s why the premiums are lower, because only healthy people are covered. Companies don’t have to raise premiums to cover the expenses of those who are sick.” This is far from an apples-to-apples comparison. The benefits, the regulation, and the people in the two markets are emphatically not the same, Fronstin explained.
Gupta’s show may have been inspired by FactCheck Wire, part of FactCheck.org, the Web site project funded mostly by the Annenberg Foundation and housed at the University of Pennsylvania. FactCheck Wire quoted from the same AHIP study:
As AHIP says, premiums at businesses that offer insurance reflect the cost for a large pool of people, both the young and healthy and the old and the sick, with the same rate normally being charged to all workers at a company. On the individual market, people are “very price sensitive,” since they are paying the full cost of the plans. (They may choose a lower-cost plan with high deductibles or copays.)
FactCheck Wire seems to be saying that people are buying less comprehensive plans, but the point was so muddled that CNN’s producers may not have understood. Aren’t fact checkers supposed to promote clarity?
We have a better idea. Instead of trying to parse the complexities of pooling arrangements, which elude most folks’ comprehension, why not find out what $5,000 really will buy? Do some shoe-leather reporting in pursuit of an old fashioned consumer story exploring what’s actually being sold. Gupta might have better served his audience had he answered the question that the show posed at its beginning.
To get some comparison shopping started, we looked at a family policy being sold in Cleveland by Anthem Blue Cross and Blue Shield—its Blue Access Value $5,000 plan. The premium for a two-person family is $4,834 a year. Each family member must meet a $5,000 deductible and then pay 30 percent of their medical bills after the deductible is met. The family’s total deductible is $10,000. So if the family has an especially sickly year, it could pay as much as $10,000 out-of-pocket before the insurance kicks in. There is no maternity coverage during pregnancy, and no hospital coverage for labor and delivery; if the family does have a child, and if that child is healthy, there is some coverage.
For the first twelve months, the policy covers the cost of the baby’s checkups and shots, subject to the deductible and coinsurance. (The deductible, and a thirty dollar copayment for each doctor’s visit, does not seem to apply to the first two visits.) Between the ages of one and eight, the policy offers only $500 of coverage for well child care—a maximum of $150 a year. A family with a sick kid might have to incur debt to pay for the child’s care.
So what does $5,000 buy? The answer may be very little.