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October 13 2009

Health Reform Will (Not) Save You Money

Nicole Kurokawa Neily

In a shocking new plot twist in the health care reform saga, it turns out the Senate Finance Committee bill will actually make health insurance MORE expensive for the average family. Who saw that one coming? Oh right, everyone.

From the Heritage Foundation's Foundry blog:

A major new report confirms the worst fears of many: Health care reform will raise the costs for most Americans-by about 18% on average. That is on top of existing inflation of health coverage.

Once the plan is fully phased-in (by 2019), a typical family of four would pay an extra $4,000 each year.

When combined with existing inflation, costs would rise from today's $12,300 annual average to $25,900. Of that 111% increase, $9,600 is due to existing factors uncorrected by the legislation, and $4,000 due to additional costs created by the legislation.

For single persons, the differential is projected at $1,500 a year. Premiums would rise from today's $4,600 a year to $9,600 overall.

Prepared by Price Waterhouse Coopers (PWC), the new analysis was requested by AHIP-America's Health Insurance Plans. It focuses on the leading plan pending in Congress, sponsored by Sen. Max Baucus (D, MT), which is scheduled for a Senate Finance Committee vote on Tuesday. The PWC report can be read here.

But why is the insurance industry turning on a bill that they originally endorsed? What changed?

As it turns out, they're not happy with the marked-up version. AHIP wants stronger penalties for not complying with the individual mandate, because they're concerned that young, healthy people who don't want to subsidize the health care of their older, sicker neighbors will just pay the penalty and still refuse to sign up - leaving only the sick and the elderly in the pool, who need expensive care.

If penalties are stiffer, these selfish young healthy people will just give up and sign up for grossly overpriced health insurance - and then companies end up with millions of new customers. Jackpot!

Reports Susan Ferrechio at the Washington Examiner:

The report blames a "weak coverage requirement" that might encourage younger and healthier individuals to opt to pay a new federal fine for not carrying insurance rather than paying for a more-expensive policy. ...

"The health insurance industry made a calculation much earlier in the year that they would basically accept just about any regulation and requirement just as long as they had a guarantee of a captive customer base, which would mean a very strongly enforced individual mandate," said Thomas Miller, a health care expert with the American Enterprise Institute and a former senior health economist for the Joint Economic Committee.

Unfortunately, higher fines will make constituents upset... which in turn, make legislators squirmy. Imposing higher penalties (which were originally in the Baucus bill and amended down) would necessitate additional subsidies to appease the low and lower-middle class individuals who will be hardest hit - a move that would drive the bill above its "bargain" price of $829 billion.

That's the other thing that everyone predicted... that a giant government program, initially forecasted at one price, would end up costing way, way more than promised.

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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