Insurers Say Government-Run Health Plan Would Wreck Private Health Coverage

SOURCE: InsuranceNewsNet, Inc.

America's Health Insurance Plans (AHIP), Blue Cross and Blue Shield Association said some provisions in the Affordable Health Choices Act would dismantle employer-based coverage, significantly increase costs of private coverage and add liabilities to the federal budget, the group said in a letter addressed to Sen. Edward Kennedy, D-Mass.

The Affordable Health Choices Act aims to reduce health care costs, make health insurance affordable to the uninsured, allow Americans to keep private coverage that they have if they want it, improve quality of health care, enhance disease prevention and strengthen the healthcare work force. Kennedy is chairman of the Senate Health, Education, Labor and Pensions Committee, which drafted the legislation. 

The insurers expressed their support the goals of the proposed legislation, but they were concerned about unintended consequences of specific provisions, particularly the creation of a government-run health care plan to compete with private insurers.

The bill states, “It is the sense of the Senate that Congress should establish a means for all Americans to enjoy affordable choices in health benefit plans, in the same manner that Members of Congress have such choices through the Federal employees health benefits program.”

The Federal Employees Health Benefits Program (FEHBP) allows insurance companies and employee associations to work out health, dental and allied plans through "managed competition.”  One advantage of the FEHBP that the Act wants to replicate for the public is the number of health insurance choices that range from very basic coverage to more comprehensive plans that cover more kinds of treatments and prescription drugs. At a press conference, President Barack Obama also said that the public plan is an important tool to discipline insurance companies.

But AHIP, which includes large insurers such as Aetna Inc., Humana Inc., Cigna Corp. and UnitedHealth Group, insists that a government plan option “would have devastating consequences on the health insurance coverage that employers and individuals currently have, the federal budget deficit and existing provider systems.”

The insurers predict that a government-run plan could accelerate the rising costs of health care in the private market.

“Medicare and Medicaid significantly underpay hospitals and physicians, compared to their actual costs of delivering medical care,” the group said. “To offset these inadequate payments, providers pass on higher costs to individuals, families and employers in the private sector.” 

If the majority of the insured migrates from employer coverage to the new government-run plan because of the lower premiums and payment rates, insurance provider would have a declining base to shift costs to in the remaining commercial market. This would cause further declines in private coverage and leaving hundreds of billions of dollars to be covered by the federal budget.

Furthermore, citing the Medicare fee-for-service program as an example, the insurers say a government-run plan for the broader population “lacks a meaningful commitment to care coordination, disease management, health promotion, and other proactive initiatives that have been successfully implemented by private sector health plans.”

AHIP, Blue Cross and Blue Shield Association are not the only ones contesting the soundness of a government-run plan. The American Medical Association (AMA) maintained their support of the private health insurance system because they were concerned a government-run plan would underpay them.

“A government-run health care plan is certainly not the only option on the table, and there are alternatives we are actively considering,” said Dr. Nancy Nielsen, AMA president, in a letter to The New York Times.

AHIP, AMA and other trade organizations representing the different health care industry stakeholders developed their own initiatives to reform the system.  These changes, which they presented to President Obama, include:

• Providing clinicians and other providers with the tools to address utilization and to improve quality and safety will help ensure that patients receive the right care at the right time in the right setting.
• Using innovative approaches to reduce the growing costs of providing health care services and that will benefit all stakeholders in the health care system.
• Streamlining the claims processing system to allow clinicians and other personnel to spend less time and fewer resources on paperwork.
• Identifying significant opportunities to better manage chronic disease that accounts for 75 percent of overall health care spending. More effective approaches to health promotion and disease prevention, with a special focus on obesity.

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