21 February 2010

We See The Problem. Where Is The Solution?

The other week, men and women across California opened up their mailboxes to find a letter from Anthem Blue Cross. The news inside was jaw-dropping. Anthem was alerting almost a million of its customers that it would be raising premiums by an average of 25 percent, with about a quarter of folks likely to see their rates go up by anywhere from 35 to 39 percent.
That was Obama's opening salvo in his weekly address on 20 February 2010.  Unfortunately, he followed that disturbing statistic with a blatant mis-statement:
The bottom line is that the status quo is good for the insurance industry and bad for America. Over the past year, as families and small business owners have struggled to pay soaring health care costs, and as millions of Americans lost their coverage, the five largest insurers made record profits of over $12 billion.
Consider, however, the financial results health insurance companies report:
At the same time, drug manufacturers enjoyed a profit margin of around 18 percent.  Bristol-Myers Squibb reported a 2009 profit margin of 56.42 percent.

These are the numbers that make up the "status quo" in health care costs in this country.  Health insurance companies are, as a group, less profitable than most utility companies, with gas and electricity utility companies enjoying profit margins of  6.9 percent and 6.6 percent, respectively).

The status quo is decidedly not good for insurance companies.  A 3.4 percent profit margin is just barely above the current prime interest rate of 3.25 percent as published in the Wall Street Journal (rate is as of 17 February 2010); a health insurance company could do just as well investing in bonds and securities and not sell insurance at all.   Health insurance profit margins are roughly in line with long term inflation rates in this country.  Those "record profits" insurance companies enjoy today do nothing more than ensure that tomorrow's bills will be paid.

Moreover, the status quo is what the Patient Protection And Affordable Care Act reinforces.  The Congressional Budget Office estimates that non-group insurance premiums in 2016 would be 10 to 13 percent higher under the Act than under current law.   Among large group insurance plans, the Act's impact on premiums is negligible:
By CBO and JCT’s estimate, the average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law. In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law.
If Obama were indeed interested in reforming and strengthening health insurance markets in this country, and improving insurance coverage among Americans, he would not defend the bloated legislation Congress has produced on this subject.  If Obama were indeed interested in improving health insurance in this country, he would demand the Patient Protection and Affordable Care Act be scrapped in its entirety, and encourage Congress to assemble a bill that does more than institutionalize the status quo he finds so outrageous.

If Obama truly wished the problem solved, he would propose a true solution.  So far, this he has not done.