888-765-5400Health Care Reform: Myths vs. Facts
Posted on 21. Dec, 2009 in A Closer Look
MYTH: Most Americans support the idea of a government-run health insurance plan.
FACT: There is simply no consensus. Where the majority stands on this issue depends considerably on how the question is phrased. If a public option is couched as simply another choice — one independent of the options they have now — of course most people say they’re for it. But when more detail is provided in evaluating the concept, opinions tend to be more negative.
For example, while a Washington Post/ABC News poll[1] did find that 57 percent of respondents supported a public option (versus 40 percent opposed), an NBC/WSJ poll[2] found that 48 percent of respondents felt a public option would “reduce access to their choice of doctors and would lower costs by limiting medical treatment options,” versus 45 percent that believed it would “help lower health care costs and provide coverage for uninsured Americans.”
Other recent polls indicate public skepticism about the direction of current health care reform proposals – particularly as they relate to a government-run health plan and health coverage costs. An October Wall Street Journal/NBC poll found that significantly more Americans think health care costs will increase under reform (47 percent) than believe reform will reduce costs (13 percent). Around the same time, a poll of likely voters conducted for the Civitas Organization[3] found North Carolinians deeply divided on this issue, with 49.3 percent of voters saying they disapprove of the health care plan being proposed by President Obama and Congress and 40.3 percent supporting it.
MYTH: Proposed health reform legislation will not tax the middle-class.
FACT: The Senate health reform bill includes indirect taxes on health care consumers, in the form of $11 billion in taxes on health insurers, drug companies and medical equipment manufacturers. Consumers will pay those costs in higher premiums. Some middle-class consumers could also see their cost impacted by the Senate’s 40 percent excise tax on “Cadillac Plans.”
If cost is the number one problem in health care, then reining in costs should be the number one priority in health care reform. New taxes and fees will increase costs for those who already have coverage.
MYTH: Private insurers hold an unfair monopoly on health insurance.
FACT: That is simply not the case in our state. According to the NC Department of Insurance, there are actually more than two dozen companies licensed to sell health insurance in North Carolina, representing competition in every line of business.[4] Consumers can, and do “vote with their feet” and buy the insurance products of their choice. Granted BCBSNC is the state’s largest insurer, but that’s because our focus has always been on prevention, value and great customer service. And unlike most of our competitors, we’re focused solely on North Carolina, positioning us to know and best address the needs of North Carolinians.
MYTH: Most workers aren’t happy with the quality of the health coverage they receive from employers.
FACT: Employees are generally highly satisfied with their coverage. Eighty-one percent of insured participants in an ABC News/Washington Post poll said they were satisfied with their current coverage if they were insured.[5] Sixty percent of employees rank health insurance as their most important employer benefit. In comparison, the second most cited response by employees was retirement plans, with only 17 percent of employees ranking those as most important.[6]
MYTH: “Health insurers make more money than any other business in America today.”[7]
FACT: That’s what Senate Majority Leader Harry Reid (D-Nev.) claims, but the facts don’t support his rhetoric about “outrageous profits.” Health insurers’ profit margins are at best in the middle of the business pack. A recent Fortune Magazine report[8] on the “most profitable industries” puts health insurers’ 2.2 percent profit margin at 35th – well behind network companies, pharmaceuticals, banks, IT, beverages and medical facilities. More heavily regulating the insurance business will only raise health care costs for working families across the country. Over the past several years, Blue Cross and Blue Shield of North Carolina has had a profit margin of between 3.6 percent and 4.6 percent. In 2008, our profit margin was 3.6 percent.
MYTH: Health insurers oppose elimination of pre-existing condition clauses.
FACT: BCBSNC and many other insurers strongly support the elimination of pre-existing conditions clauses and health-based underwriting, as long as everyone is covered. Insurers have traditionally included such clauses in insurance contracts to encourage people to be continuously covered, whether they are sick or ill. Pre-existing condition clauses and health based underwriting are simply tools to encourage people to stay covered and to maintain a broad-based pool which improves affordability for all.
If the personal responsibility requirement with sufficient enforcement goes through, it will be time to retire these types of tools. Here’s why they can be beneficial:
If someone has a heart condition that existed at the time of enrollment, they can still buy comprehensive insurance that will cover other needs unrelated to that condition. For example, treatment related to a new cancer diagnosis or emergency services would be covered – even during a temporary waiting period for the heart condition. Pre-existing condition clauses help make coverage more affordable. Pre-existing condition clauses create a strong incentive to carry coverage all the time – not just when you’re sick. This keeps a lot of healthy individuals in the insurance pool, keeping costs down for everyone. We want to see a health care system in which no one would be denied coverage or face unaffordable rates because of their health circumstances. We would prefer to eliminate this kind of underwriting entirely, but that can only be done if we can get everyone – sick, well and in-between – paying into the health insurance system on a consistent basis, creating a broad-based pool to spread out and absorb these costs.
MYTH: Health insurers support gender discrimination.
FACT: BCBSNC supports the elimination of rate differentials between men and women. Gender has historically been used in ratemaking because actuarial evidence shows clear gender differences in the use of medical services. For example, women have higher medical claims than men of similar age until their mid-50s. Women’s rates can be lowered only by raising rates on men substantially, with the possibility that many young, healthy men will drop coverage. Also, unisex rating would be to women’s disadvantage later in life when claims for men surpass those of women. While we support this change, consumers should understand that lowering rates for one group will result in premium increases for another.
MYTH: Health care costs are rising because of insurance industry profits and hefty executive salaries.
FACT: In 2007, national health care expenditures totaled $2.2 trillion. CEO compensation is a mere 0.005 percent of total spending.[9] Insurer scapegoating is a political tactic, not an answer to health care cost control.
MYTH: Government programs don’t impact the cost of private care.
FACT: The continued underpayment of providers by public programs has devastating consequences for families and employers that are struggling to afford health care coverage. Low Medicare and Medicaid reimbursements to hospitals and physicians lead to significantly higher health insurance costs for consumers and employers. Annual health care spending for an average family of four is $1,788 higher than it would be if Medicare, Medicaid and private employers paid hospitals and physicians similar rates, with total provider reimbursement unchanged.[10] Greater enrollment in a government program – or an expansion of Medicare – would make this problem far worse, raising costs for customers of private health plans even further.
MYTH: Most employees would rather have a higher salary than employer-provided health coverage.
FACT: The value employees place on health benefits exceeds the actual cost of those benefits.
Seventy-six percent of employees preferred $7,500 in employer-based health coverage to an additional $7,500 in wages.
Those preferring health benefits were asked what dollar increase in taxable income would be required for them to give up $7,500 of employer health benefits. Fifty percent said $10,000 or more; 11 percent said no increase in taxable income would be enough.[11]
MYTH: Insurers are opposed to health care reform because they want to protect their profits.
FACT: BCBSNC strongly supports enactment of health care reform this year. We also support new federal rules to require insurers to offer coverage to everyone – regardless of pre-existing medical conditions – coupled with an individual responsibility requirement and federal subsidies to make health coverage affordable. Without reform that truly works to bend the cost curve, our current system is not good for the insurance industry. At current cost trends, a large portion of our current customers will likely be priced out of the market. That’s bad for Americans AND the insurance industry. We need to reform our system to make it sustainable in the long term, but reform should not drive premium costs beyond the reach of American families.
MYTH: Insurers can drop you whenever you get sick.
FACT: Federal (HIPAA, 1996) and state laws already prohibit insurers from dropping people when they get sick. North Carolina insurers are required to issue coverage on a “guaranteed renewable” basis – meaning the decision to renew is made by the individual and not the insurer. These rules apply to coverage sold to individuals, small employers and large employers.
MYTH: Insurers raise premiums when someone becomes sick.
FACT: Federal and state laws prevent employers or health insurers from increasing a consumer’s premiums if they get sick or incur costly medical claims. While medical inflation is causing rates to increase annually, we do not raise the rates of a customer when they become sick. We have long supported prohibitions against raising premiums because a customer’s health changes.
MYTH: Health insurers oppose a government-run health plan out of fear of competition.
FACT: Health insurers are no strangers to competition, which is strong even among companies with large market shares. Employers and individuals can – and do – change companies if they can save even a few dollars on premiums. There are at least two dozen companies offering health insurance in North Carolina. BCBSNC faces competition in every line of business. [12] The problem with a government-run plan is that it can dictate prices to hospitals, doctors and vendors. For all their reported market clout, private sector insurers can’t. That’s why Medicare and Medicaid now reimburse doctors far less than market rates, leading to higher charges on private insurers to make up the difference. This “cost shift” would get much worse if tens of millions more Americans get their coverage from a government plan. It wouldn’t take long for private coverage to become so much more expensive that the government plan would push them out of existence.
The government’s ability to manage its current health care responsibilities is subject to question, given the questions about Medicare solvency and news reports of widespread fraud, as noted in a 60 Minutes story.
There are serious concerns about Medicare financial solvency. Growing annual deficits are projected to exhaust the program’s reserves in 2017.[13]
MYTH: Industry anti-trust exemptions give insurers an unfair advantage and lead to monopolies and higher rates for insurance.
FACT: Insurers are only exempt from anti-trust to the extent they are closely regulated by the states, so removing these exemptions won’t make insurance any more affordable. The Congressional Budget Office issued a report[14] stating repeal of the McCarran Ferguson anti-trust exemptions “would have no significant effect on the premiums that private insurers would charge for health insurance.” Robert Laszewski, an Alexandria, Virginia-based consultant said “Either the people who are proposing this are really naïve about how insurance is regulated, or they are just playing political games with the voters.”[15]
MYTH: Health insurer political contributions give the industry too much influence.
FACT: Health insurers control the political debate? Hardly! See this analysis of “heavy hitters” in the political world, courtesy of the nonpartisan Center for Responsive Politics:
http://www.opensecrets.org/orgs/list.php?order=A. Of the top 20 influential segments, labor unions take 12 slots.
At BCBSNC, we believe we have a responsibility to our customers and our state to be engaged in this debate and to provide policymakers with information that will help them evaluate the likely impact of various reform approaches — particularly cost implications. Health care reform that drives up health care costs is ultimately bad for everyone.
MYTH: The Federal government has a strong track record in running health plans and can certainly handle a vast expansion in its role.
FACT: Medicare, the federal insurance program for the elderly and disabled, and Medicaid, the federal-state program for the poor, are popular with beneficiaries, many of whom would have few other options. But costs for these plans have run many times higher than initially projected, and fraud remains a significant problem. The Medicare program, which spends more than $400 billion a year, reviews only 3 percent of claims. Medicare reported that it improperly paid more than $10 billion in claims in the fiscal year that ended Sept. 30, 2008.[16] The solvency of Medicare remains in question, with its hospital program reserves projected to be depleted in 2017. [17]
*The content of this post is provided by BCBSNC.
For more information about health insurance coverage in North Carolina, please visit our website at http://www.nchealthplans.com/ or call our toll free number 888-765-5400 and speak with one of our qualified agents. Our agency provides coverage for health insurance in North Carolina through Blue Cross Blue Shield of North Carolina (BCBSNC). You may qualify for a 15% healthy lifestyle discount if you are in excellent health. Call us for details.
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[1] NBC News/Wall Street Journal Poll, October 2009 http://firstread.msnbc.msn.com/archive/2009/08/18/2033674.aspx
[2] Washington Post ABC News Poll, August 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/19/AR2009101902451.html
[3] http://www.nccivitas.org/media/press-releases/civitas-poll-support-health-care-bill-continues-decline
[4] http://www.ncdoi.com/me/annualdatafiling/2007/enrollment%20data/enrollment%20by%20plan%2012-31-07.xls
[5] http://abcnews.go.com/PollingUnit/story?page=1&id=7910801
[6] EBRI Health Confidence Survey, 2004
[7] Politico, October 14, 2009 http://www.politico.com/news/stories/1009/28276.html
[8] Fortune 500 2009 Top Industries: Most profitable http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/profits/
[9] www.factcheck.org
[10] Milliman report, “Hospital & Physician Cost Shift – Payment Level Comparison of Medicare, Medicaid, and Commercial Payers,” December 2008
[11] EBRI Health Confidence Survey, 2008
[12] http://www.ncdoi.com/me/annualdatafiling/2007/enrollment%20data/enrollment%20by%20plan%2012-31-07.xls
[13] A SUMMARY OF THE 2009 ANNUAL REPORTS — Social Security and Medicare Boards of Trustees (http://www.ssa.gov/OACT/TRSUM/index.html)
[14] CBO Cost Estimate on H.R. 3596, Health Insurance Industry Antitrust Enforcement Act of 2009 – October 23, 2009 http://www.cbo.gov/ftpdocs/106xx/doc10673/hr3596.pdf
[15] Bloomberg News 10/23/2009
[16] Wall Street Journal 10/28/09
[17] A SUMMARY OF THE 2009 ANNUAL REPORTS — Social Security and Medicare Boards of Trustees (http://www.ssa.gov/OACT/TRSUM/index.html)