Alexander: Studies Show New Health Care Law is “Expanding an Expensive Health Care System….In a Way That Is Increasing Premiums”

Posted on October 6, 2011

Recalls the White House Summit last year, where he warned the President that individual plan premiums would increase under the health care law: “this was predicted by Republicans who offered an alternative to take steps to decrease costs in health care, instead of this big, comprehensive law that expanded a system that already costs too much”

“It offers even more reasons why we should repeal or make significant changes in the health care law if we want to create an environment in which we can make it easier and cheaper to grow private sector jobs, and in which more Americans can afford health insurance at a reasonable cost.”

– Lamar Alexander  

WASHINGTON – In a speech on the Senate floor Wednesday, U.S. Senator Lamar Alexander (R-Tenn.) reported on a new survey that finds employer-sponsored health insurance premiums for the average family increased 9 percent over last year, and another new survey showing that premiums in the individual market have increased nearly 5 percent over last year, and reminded his colleagues that at the White House health care summit in February of last year, he warned the President that the new health care law would increase insurance premiums for individuals.

“I said to the President: ‘Mr. President, respectfully, your new health care law that you propose is going to increase individual premiums.’ He stopped me and said:  ‘Now Lamar, let's get our facts straight. You are wrong about that.’ He proceeded to explain to me why I was wrong and he was right.

“With all respect, I believe I was right and even just a year later, what the Congressional Budget Office was saying then, which was that individual premiums would go up as a result of the health care law, the last 17 months have shown that we were exactly right. …These individual market premiums, premiums that individuals buy without an employer’s help, are not the largest share of insurance policies in America, but they affect roughly 12 to 15 million Americans. That is a lot of people who are having their insurance costs go up. Aon Hewitt's recently released 2011 Health Insurance Trend Driver Survey reports that for 2011, individual health care plans reported estimated 4.7-percent increases directly due to the new health care law.”

The full transcript follows:

“In February of last year, we had a fairly extraordinary event at the Blair House here in Washington. The President invited a large number of Members of Congress -- must have been 20 or 30 of us around the table. He sat there the whole day, and we sat around the table and we talked about health care. It was called the Health Care Summit.

“A great many Americans watched that live on television, and because of the Internet and other explosions of new media, they still watch some of the things that were said that day. The reason I know that is because people have come up to me often and talked about an exchange I had with the President of the United States.

“The issue was about health care premiums in the individual market. Citing a Congressional Budget Office letter, I said to the President: ‘Mr. President, respectfully, your new health care law that you propose is going to increase individual premiums.’

“He stopped me and said:  ‘Now Lamar, let's get our facts straight. You are wrong about that.’ He proceeded to explain to me why I was wrong and he was right.

“With all respect, I believe I was right and even just a year later, what the Congressional Budget Office was saying then, which was that individual premiums would go up as a result of the health care law, the last 17 months have shown that we were exactly right. This last week the Kaiser Family Foundation released a survey that showed the average family premium for employer-sponsored insurance was $15,000 in 2011, a 9-percent increase over the previous year. Let me quickly say that employer-sponsored insurance is not the same as the individual insurance I was talking about with the President a year ago. But it is the same subject. Republicans were saying that we opposed the health care bill because it would increase premiums, and what we wanted to do was to lower the cost of health care for Americans by going step by step in that direction rather than expanding an expensive health care system that was already too expensive for more Americans, and doing it in a way that would increase premiums for many Americans.

“ABC News said the Kaiser Family Foundation report ‘underlines that many of the promises surrounding President Obama's health care legislation remain unfulfilled. Though the White House argues that change is coming.’

“Even the New York Times on September 27 said: ‘The steep increase in rates is particularly unwelcome at a time when the economy is still sputtering. Many businesses cite the high cost of coverage as a factor in their decision not to hire. And health insurance has become increasingly unaffordable for many Americans.’

“I reported on this Senate floor my conversations with the chief executive officers of restaurant chains around the country. Together they are the second largest employer in the country after the government, and they employ a great many young people and low-income people, the kind of men and women who are looking for jobs today. What they were telling me was that the mandates of the health care law will make it more difficult for them to hire people. In one specific example, one of the largest of the restaurant chains was saying that he operates his store with 90 employees today, and because of the health care mandates, he will seek to operate his store with 70 employees. That is not a way to increase the number of jobs.

“But there are other provisions in the health care law that cause premiums to go up, which was the point of my discussion with the President in February of 2010.

“The CMS Chief Actuary predicted in 2010, saying that by 2014 -- still three years away -- growth in private health insurance premiums is expected to accelerate to 9.4 percent, 4.4 percent higher than in the absence of health reform.

“The President had said in his discussion with me that under the law he proposed, the individual market would cost 40 to 20 percent less. That was also in the Congressional Budget Office letter. But those reductions were overwhelmed by other costs that were identified in the CBO letter that would produce a 27- to 30-percent increase. So the net result, according to the predictions in November 2009 by the Congressional Budget Office, was there would be an increase in individual premiums of 10 to 13 percent.

“These individual market premiums, premiums that individuals buy without an employer’s help, are not the largest share of insurance policies in America, but they affect roughly 12 to 15 million Americans. That is a lot of people who are having their insurance costs go up. Aon Hewitt's recently released 2011 Health Insurance Trend Driver Survey reports that for 2011, individual health care plans reported estimated 4.7-percent increases directly due to the new health care law.

“Then according to the September 8, 2010 Wall Street Journal article: ‘Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats' efforts to trumpet their significant achievement before the mid-term elections. Aetna, some Blue Cross Blue Shield plans and other smaller carriers have asked for premium increases of between 1 and 9 percent to pay for extra benefits required under the law.’

“In the same article it says Aetna said that extra benefits forced it to seek rate increases for individual plans of 5 to 7 percent in California, and 5.5 to 6.8 percent in Nevada. That was precisely the discussion I was having with the President in February 2010, when I said that under the health care law, because of the mandates in the law, individual health care premium costs will go up.

“In Wisconsin and North Carolina, according to that same article, Celtic Insurance Company says half of the 18-percent increase it is seeking comes from complying with health care mandates.

“Then in a September 16 article last year in the Hartford Courant, ConnectiCare is seeking an average 22-percent hike for its individual market HMO plans. Anthem Blue Cross and Blue Shield in Connecticut say in a letter, it expects the Federal health reform law to increase rates by as much as 22.9 percent for just a single provision.

“These increases happen for predictable reasons. Because of the requirements in the law for minimum credible coverage -- in other words, if you are required to buy a better kind of health insurance, if you are required to buy a Cadillac instead of a Chevrolet, it is going cost more. And it does cost more.

“Another factor that will cause insurance premiums to rise is the new taxes on insurance, lifesaving medical devices and medicines in the health reform law. Someone has to pay for those costs, and the ones who are going to pay for them are the people who buy health insurance.

“Then there is the question of what we call cost shift. When we add 25 million Americans to Medicaid, premiums will increase because the costs will shift to private insurers to help pay for those costs. That is according to the Chief Actuary of CMS which is in this administration.

“Then, finally, age rating is going to cause insurance premiums to go up. What it basically says is that older Americans will not have to pay as much, so younger Americans are going to have to pay more. It is no surprise that under the new health care law, health insurance premiums are going up, becoming an even bigger drag on employment and on family budgets. This was predicted by the Congressional Budget Office while we were debating the health care law. It was predicted by Republicans who offered an alternative to take steps to decrease costs in health care, instead of this big, comprehensive law that expanded the system that already costs too much.

“It offers even more reasons why we should repeal or make significant changes in the health care law if we want to create an environment in which we can make it easier and cheaper to grow private sector jobs, and in which more Americans can afford a reasonable cost health insurance.”

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