Insurers' Health Reform Attack Draws Fire

Updated 6:38 p.m. Eastern

Insurance companies aren't playing nice any more on the health care overhaul.

The industry put out a report Monday concluding that the Senate's health care legislation would drive up costs to consumers, delivering a dire message at a crucial point in the debate and potentially threatening President Obama's top domestic priority.

The White House and congressional Democrats dismissed the late-in-coming message as a "hatchet job." But it put them and their allies on the defensive a day ahead of a pivotal vote in the Senate Finance Committee on sweeping legislation that aims to achieve Mr. Obama's goals of extending coverage to the uninsured and curtailing spiraling medical costs.

"I really don't think it's worth the paper it's written on," AARP Executive Vice President John Rother said Monday of the insurance industry report. "If anyone believes it, that's a problem."

The study commissioned by America's Health Insurance Plans marked a shift in strategy by the industry, which had been working for months behind the scenes to help shape health care legislation. With the Senate panel set to vote on legislation the industry fears could result in a loss of revenue, the insurers went on the attack, in dramatic fashion.

Late Sunday, AHIP sent reporters and its member companies a new accounting firm study that projects the legislation would add $1,700 a year to the cost of family coverage in 2013, when most of the major provisions in the bill would be in effect.

The White House insists the bill would bring health insurance costs down. However, Paul Ginsburg, a non-partisan analyst at the Center for Studying Health System Change, told CBS News Chief White House Correspondent Chip Reid the insurance companies do have a point.

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"If people aren't mandated to buy insurance, then you will get a situation where people stay uninsured until they get sick," Ginsburg told Reid.

Premiums for a single person would go up by $600 more than would be the case without the legislation, the PricewaterhouseCoopers analysis concluded in the study commissioned by the insurance group.

The study "confirms that the current legislation will make coverage less affordable for individuals, families and employers, and the study shows that costs will go up even faster than they would under the current system," Karen Ignagni, the top industry lobbyist in Washington, told reporters in a conference call Monday.

The industry said the cost increases would result from new taxes and from a weakening of the penalties for failing to get insurance - a change that would let Americans postpone getting coverage until they get sick.

Ignagni said her group wanted to continue to work with lawmakers to improve the proposals on Capitol Hill, but when questioned she didn't rule out using the findings from the study in an ad campaign against Mr. Obama's plans.

Democrats and their allies criticized the report as biased.

Some insurance industry critics say the real reason insurance companies are so upset about the Senate bill is that it cuts into some very nice tax breaks for insurance company CEOs.

"I think though that maybe they have gotten worried that as we get close to really getting reform done they've gotten more worried about their profits," Democratic spokeswoman Nancy Ann de Parle told Reid.

Health economist Len Nichols of the New America Foundation contended that, among other problems, the study failed to take into account the impact of subsidies that would help low- and middle-income people buy coverage. He said it also left out a key expected impact of a proposed new tax on high-value insurance plans, which is a reduction in the use of health services.

"It was paid for by people who are not interested in an objective analysis of the truth but are interested in a particular point of view being inserted into the political process right now," Nichols said.

Spokesmen for the White House and for Finance Committee Chairman Max Baucus, D-Mont., attacked the report along similar lines. "It's a health insurance company hatchet job, plain and simple," said Baucus spokesman Scott Mulhauser.

The committee is to vote on its 10-year, $829 billion bill on Tuesday, but more important to the industry are the steps beyond the panel's decision.

Senate Majority Leader Harry Reid, D-Nev., will be merging the bill with a companion measure from the Senate Health, Education, Labor and Pensions Committee, with the goal of a sweeping yet affordable bill. In the House, Speaker Nancy Pelosi, D-Calif., and other Democratic leaders have been pulling together legislation from three committees.

Unlike the 1990s, when it contributed to the failure of President Clinton's health overhaul, the insurance industry has been attracted by the promise of millions more people getting coverage - millions of new consumers buying policies.

The Baucus plan got a boost last week when the Congressional Budget Office estimated it would cover 94 percent of eligible Americans while still reducing the federal deficit. But Ignagni said that number needed to be in the high 90s for the system to work without crushing costs for privately insured individuals.

The PricewaterhouseCoopers analysis attempted to get at that issue, concluding that a combination of factors in the bill - and decisions by lawmakers as they amended it - would raise costs.

The chief reason, said the report, is a decision by lawmakers to weaken proposed penalties for failing to get health insurance. The bill would require insurers to take all applicants, doing away with denials for pre-existing health problems. In return, most Americans would be required to carry coverage, either through an employer or a government program, or by buying it themselves.

But the CBO estimated that even with new federal subsidies, some 17 million Americans would still be unable to afford health insurance. Faced with that affordability problem, senators opted to ease the fines for going without coverage from the levels Baucus originally proposed. The industry says that will only let people postpone getting coverage until they get sick.

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On the Net:

America's Health Insurance Plans: http://www.ahip.org/

Center for Studying Health System Change: http://www.hschange.com/

New America Foundation: http://www.newamerica.net/

Senate Finance Committee: http://finance.senate.gov/
By Associated Press Writer Ricardo Alonso-Zaldivar