Health-reform impact on insurers unclear
For all President Obama's tough talk about insurance companies Wednesday night, health-economics experts said his overhaul plan held little obvious pain for insurers.
Requiring everyone to buy coverage - with government subsidies when necessary - would bring in millions of new customers, lower selling costs, and reduce the hidden tax that all privately insured people pay for those without insurance, experts said.
Insurance companies would have to give up some of their most egregious practices - refusing to sell insurance to the people most likely to need it, for example, or dropping customers who get sick - but they would all be in the same boat.
Unless the government controls the cost of premiums, and Obama did not mention that, the proposed changes do not guarantee affordable prices.
On the other hand, insurance experts said, the companies, which have strongly opposed the addition of a public option in addition to Medicaid and Medicare, have legitimate reason to worry about competing with the government. And, depending on how it is structured, an insurance exchange for individuals and small businesses could also step up competition.
Obama has signaled he was willing to compromise on the public option.
However you look at it, the experts said, the overhaul proposal is not likely to translate into lower premiums.
"Oh, going down is not to be hoped for," said Mark Pauly, a University of Pennsylvania health economist. "They might increase less rapidly."
Philadelphia's largest insurer, Independence Blue Cross, declined to speculate on any potential impact, saying too many details were unknown.
Economists agreed that key elements, such as how insurance plans or the insurance exchanges would be structured, could dramatically affect their impact.
Would insurers, for example, be required to offer policies at the same price to everyone in the same age range, such as 45 to 55? Could they charge higher prices for smokers or young men who race motorcycles?
Would people using the exchange still be buying insurance as individuals, or would they be buying as a group, which would greatly increase their market clout?
Tom Getzen, a Temple University health economist, said an exchange likely would give individuals and small groups more choices and information than they now have. That could lower profits for the companies.
"It's going to be a tougher, competitive market for them," he said.
But Pauly said that requiring people to buy insurance also would lower costs for insurers. Currently, selling high-priced individual or small-group plans is tough work, and it leads to higher administrative costs for insurers than selling to big groups does. When people legally have to buy, they will seek out insurance companies.
Vincent Burke, senior managing director of SMART Business Advisory & Consulting in Devon, which advises many insurance companies, said insurers worried that a public plan would offer consumers lower prices by dictating lower reimbursement levels to doctors and hospitals.
Medicare and Medicaid typically pay providers less than private insurers, and the companies worry that a public plan for younger, wealthier people might do the same. Private companies end up subsidizing care for people in public plans, which makes their premiums more expensive.
"One of the things that they are very fearful of is that they would end up losing most of their individual subscribers as well as their small groups," Burke said.
Obama promised Wednesday night that the public plan would play by the same rules as private insurers.
Contact staff writer Stacey Burling at 215-854-4944 or sburling@phillynews.com.
