The Big Boys: An affordability puzzle

Healthcare Insurers push a one-sided meme, and the press runs with it

During the long debate over health reform, one issue barely discussed was whether the Americans who would be required to buy health coverage could afford it. Politicians and the press brushed aside affordability and buried it under the rhetoric. CJR urged reporters to examine the affordability matter. We interviewed Democratic Sen. Ron Wyden, for example, one of the few Beltway types openly skeptical about how affordable insurance would be under Obamacare. The subject did not fit well with the media’s idea of news, Wyden told us.

It sure does fit now. What a difference three years makes! Over the last two months the affordability question has suddenly become hot. News outlets from NBC’s Nightly News and Forbes to The Hill and Politico have reported that Americans, especially young adults, might not be able to pay for insurance the law requires them to have. The theme of their stories: young people are in for sticker shock.

Why the surge in interest? Mostly because the marketing machine operated by the insurance industry’s trade association, America’s Health Insurance Plans (AHIP), is at hard at work.

AHIP is peddling appealing messages about affordability to the media, which are passing them along to the public. They’ve also passed along AHIP’s legislative wish list—a list that the administration supporters fear could weaken some of the law’s provisions.

A big target on that list is Obamacare’s limit on what insurers can charge older people buying in the so-called individual market. The insurers would like to charge them more, and they are putting forward the plight of young people as their rationale.

The Affordable Care Act says premiums for older Americans can be no greater than three times what they are for younger ones, a restriction meant to protect seniors, but which carriers believe may not bring in enough revenue to cover the cost of claims from an age group likely to have health problems. They argued against this 3 to 1 arrangement during the health reform debate, instead pushing for higher ratios, like 5 to 1. Today they are lobbying for a delay in implementing the restriction. That would give them time to convince lawmakers to change the law.

Media outreach seems to be part of the strategy. Are the insurers peddling hysteria or reality?

Insurance companies argue that, under the rules that come with Obamacare, coverage will become too costly for young, healthy people, whose premiums they need in the risk pool to cover the claims of the older, sicker people the law says they must now must insure. The high medical costs associated with seniors, they worry, could squeeze bottom lines and anger the Wall Street gods. After all, insurers are not charitable institutions.

At heart, their fears stem from complexities and contradictions in the reform law—the difficulty of trying to achieve universal coverage and fairness in a private, for-profit health system that’s inherently inequitable and unfair.

AHIP’s president, Karen Ignagni, took the insurers’ case to a conference on the Business of Healthcare Post-Election, held at the University of Miami in early February. The Miami Herald reported that she had “strong ideas about tweaks that could minimize disruption” in the insurance market. One was to postpone for two years the 3 to 1 rate increase provision, so, The Herald said, “younger people could sign up for insurance without huge sticker shock.”

AHIP isn’t shy about claiming credit for the sudden surge of media coverage on a topic that editors once considered a yawner. Its message crafters know that the press likes controversy, and there’s controversy aplenty about the sky-high cost of health insurance. The group’s website boasts that “AHIP has been raising awareness of factors driving premiums though “Time for Affordability”—the name for its campaign—“and these efforts have been picked up by a variety of news outlets over the past few weeks,” The site lists a number of news hits.

The ammo for the surge seems to be a study by actuaries at Oliver Wyman, a consulting firm, and reported in Contingencies, a publication of the American Academy of Actuaries. The firm’s analysis showed that under Obamacare, single-coverage premiums for people 21 to 29 who are not eligible for government subsidies would increase by 42 percent over what the premiums would be without the new law. Those 30 to 39 would find their premiums up 31 percent, while 60 to 64 year-olds would see an increase of only one percent. AHIP sent out this “news” in a press release on January 7. Most media coverage showed up after that.

The Oliver Wyman firm does not exactly have an arms-length relationship with AHIP, a point skipped over in press accounts. AHIP’s press release said “AHIP provided support to Oliver Wyman for earlier actuarial modeling and analysis similar to that highlighted in the Contingencies article.” We asked AHIP if it paid for that study, but got no response.

Also on AHIP’s wish list: Insurers working with small businesses want to repeal a health tax levied on insurance carriers, which they argue will be passed on to employers in the form of higher premiums.

In December AHIP sent out a press release announcing another study, showing the impact of the health insurance tax that will be levied to pay for subsidies for the uninsured. The release disclosed that, yes, Oliver Wyman had “conducted a new state-by-state analysis for American’s Health Insurance Plans.” That analysis, AHIP said, built on a 2011 report that showed the impact of the annual tax assessed on insurance plans. The 2011 report—also paid for by AHIP—said that tax would raise premiums in the insured market by 1.9 to 2.3 percent on average in 2014. Many media stories also referred to the health insurance tax and reported those numbers from Wyman.

AHIP has been upfront about its support for Oliver Wyman studies, but its disclosures seem to have escaped the press. Politico reported “the health insurance tax is going to have the largest impact” on premium hikes “according to a study by Oliver Wyman that has been touted by the insurance industry.” The word touted somehow doesn’t quite mean the same thing as paid for. Politico did link to the study if anyone wanted to check it out.

The Idaho Statesman picked up the numbers about younger people paying more and noted they came from Wyman, but didn’t show how the consulting firm was connected to AHIP. A post on the Fox News blog came the closest to fuller disclosure. It reported that premiums for individuals and small groups were projected to increase roughly two percent this year “according to a widely cited analysis by the insurance industry.”

Some reporters moved beyond the press release and framed a larger story, talking about insurance rate hikes that are occurring in several states. Noam Levey offered readers an overview in the Los Angeles Times. He passed along the same meme: state officials have sounded warnings that the young “may see considerably higher prices than expected.” It was the same story in the Alaska Dispatch, where writer Alex DeMarban talked to the state’s insurers. The president of Premera Blue Cross Blue Shield of Alaska said some changes due to the law would push costs “toward rate-payers who earn good money, especially younger ones.”

The press generally portrayed younger people as “losers” in this situation, as Avik Roy did in Forbes : A “piece of the law forces young people to pay dramatically more for health insurance in order to partially subsidize the cost of insurance for older Americans.” But news stories did not tend to report what happens to older folks, a group, by the way, about the same size as young people. Recent numbers from The Commonwealth Fund, based on the government’s current population survey, show that older people, ages 50-64, make up about 21 percent of the 17 million people currently in the individual market. People ages 19-29 make up 23 percent—not much difference. [Full disclosure: Commonwealth supports The Second Opinion].

Even with a 3 to 1 ratio, older people will pay a lot more in absolute dollars than younger people. A few years ago I shopped The Connector, the exchange in Massachusetts that was a model for Obamacare, and which allowed a 2 to 1 ratio between what older people can be charged vs. young people. There I found that a 54-year old couple in Pittsfield would spend $2,252 per month for a premium HMO from Blue Cross Blue Shield, while a 34-year-old couple there would pay $1,649. Differences even higher than these will be apparent in all states next year, when the 3-1 ratio takes effect.

And you can imagine the differences with a 5-1 ratio. Young people often don’t have a lot of money. But what is less appreciated is that old people often don’t either.

That’s part of the rate story too, but one AHIP has so far not chosen to tell. When older people find they can’t afford high premiums, they also might decide not to buy insurance. Will that be a good or a bad thing for insurers? Or for the healthcare system overall? Or for Americans young now who will be old later? Reporters need to raise those questions, too, and they shouldn’t wait for wait for AHIP to tell them the answers.

The Second Opinion, CJR’s healthcare desk, is part of our United States Project on the coverage of politics and policy. Follow @USProjectCJR for more posts from this author and the rest of the United States Project team. And follow Trudy Lieberman @Trudy_Lieberman.

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Health Reform Lessons from Massachusetts Part V

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , ,