Snake oil on health reform

Snake oil on health reform

March 27th, 2011 in Opinion Times

Sen. Lamar Alexander, the Tennessee Republican who serves his party in the U.S. Senate as caucus chairman, is one of the GOP's many master messengers of the slick and entirely untrue propaganda about the Affordable Care Act that the right wing keeps hawking in an attempt to defeat President Obama in the 2012 election.

Consider his statement last week that rising health care premiums in the past year somehow prove that the promised benefits of the health care reform act just aren't working. He said he told President Obama at the health care summit last year that "his bill would raise individual premiums." Today, the senator asserted, "individual premiums are increasing, taxes are going up, and Medicare is getting cut."

To put it politely, that's a slick distortion of reality.

Insurers' greed drives rates

Health care premiums are increasing, but not because the Affordable Care Act has been adopted. Rather, it's because the ACA's most essential levers to control health care spending, due to monolithic Republican opposition, won't be implemented until the full bill takes effect in 2014. So today, health insurance companies are still able to raise premiums as high and as fast as they did in the bad old days before Congress - make that, the Democratic Party - had enough votes to assemble the health care reform initiative.

Perhaps worse than their run-up in profits, insurers are still denying coverage to a huge percentage of Americans who try to buy individual coverage policies. BlueCross BlueShield, Tennessee's largest insurer with 63 percent of the market, had a denial rate of 34 percent, according to a recent posting on a new government Web site.

Insurers deny coverage

That means it rejects one of every three people who apply for individual policies. Tennessee's other major insurance companies - UnitedHealth, Cigna, Humana and Aetna - vary little from that rate of denial, and as a group, their denial rates are nearly twice as high as the national average.

With so many employers now failing to offer employer-organized insurance - even weak policies with high deductibles and co-pays and strictly limited coverage - that's a killer for America's 51 million uninsured, most of whom are stuck in jobs without insurance or are self-employed. They make too much money to qualify for Medicaid, they aren't old enough to qualify for Medicare, and they have so-called pre-existing conditions - a term that can cover about anything, from chronic illness to an innocuous condition - which prompt insurers to deny them coverage or to charge unaffordable rates.

Insurers can still do that because the most broad-based insurance reforms of the ACA won't take effect until 2014. They issue individual policies tailored to avoid health care expenditures in order to improve their bottom line.

Thus their return on equity - a far better measure for investors than their gross adjusted profit margins - shows percentage returns in the teens to the 20s, numbers than make Wall Street smile. Indeed, the combined earnings for the last quarter of 2010 of the five biggest private insurers - WellPoint, UnitedHealth, Aetna, Cigna and Humana - zoomed to more than $11.7 billion, 17 percent more than they made in 2009, and a whopping 51 percent more than they made in 2008. No wonder their stocks rank so high.

Their earnings - and premiums - are up for several reasons, none of which are the fault of the Affordable Care Act. Insurers are simply rushing to raise rates before they come under new ACA regulations in 2014.

Antidote to insurer abuse

In fact, the ACA is the antidote to what ails insurance companies' customers. The act will broaden enrollee coverage pools, ban denials of coverage for pre-existing conditions for adults, ban annual limits on coverage, require community-based flat rates for all enrollees regardless of their health condition, and govern the ratio of spending on overhead and executive salaries vs. the currently low percentages of premium dollars spent for enrollees actual health care. The new rules in 2014 will require insurers to spend a minimum of 85 percent of premium dollars on actual health care for large group members, and at least 80 percent for small group members and individual policy holders.

To be sure, more than half a dozen key reforms have gone into effect over the past year. These ban insurance exclusions for pre-existing conditions in children, eliminate lifetime coverage limits, ban the dropping of insurance policies of enrollees when they become ill, allow adult children to remain on parents' policies until they reach 26, and give $250 more in covered prescription drug care for seniors before they hit the doughnut hole of lost coverage, the first of several steps to end the doughnut hole entirely.

Alexander's other claims - that taxes have gone up and Medicare has been cut - are equally fallacious.

Alexander's other falsehoods

The Obama administration not only proposed to keep the Bush era tax cuts for all but the wealthiest 2 percent: It also got Republicans to agree to a 33 percent interim cut on Social Security taxes to help sustain the economic recovery, in return for allowing the tax cuts for the wealthy to remain intact for two more years, the Republicans top goal.

As for Medicare cuts, there aren't any. That Republican claim simply distorts the Obama administration's decision to end the egregious subsidies that Republicans gave health insurers in 2003 to guarantee them a higher profit for offering Medicare "advantage" programs. That sweetheart deal for insurers actually robbed that money from the Medicare budget, which prompted cuts in Medicare benefits. It was a ruse to lure people out of Medicare proper as part of the GOP goal to privatize Medicare and to begin, essentially, to dismantle Medicare.

It was a boon to Medicare to get back that needless and rich subsidy from for-profit insurers. If they can't compete with Medicare on their own profit dime - and their high earnings show that some could do so - they sure don't deserve a subsidy from the Medicare budget.