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America’s Health Insurance Plans (AHIP), the health insurance industry’s largest lobbying organization, releases a study that claims the Democrats’ health care reform initiative would send health insurance costs sharply upward. The study is released the day before the Senate Finance Committee votes on its version of the reform proposal. (The Week 10/12/2009) AHIP says it intends to circulate the study among lawmakers on Capitol Hill and use it as the basis for new advertisements attacking the health care reform proposals. (Connally 10/12/2009) NBC Washington calls the study “a surgical strike against Democrats’ best hope for passing health reform,” specifically targeting the Finance Committee’s legislative efforts, which it calls the “Baucus bill” for committee chairman Max Baucus (D-MT). Until now, AHIP has operated largely behind the scenes to delay or terminate Congressional efforts to reform US health care; the study marks its most public and overt effort to influence the discussion. According to the study, which was carried out by accounting and services firm PriceWaterhouseCoopers (PWC) and paid for by AHIP, the average cost increase would be $1,700 per family per year by 2013. “[T]he cumulative increases in the cost of a typical family policy… will be approximately $20,700 more than it would be under the current system,” the report claims. “[T]he cost of coverage for both single and family policies in the individual, small group, large group, and self-funded insurance markets” will rise dramatically. AHIP official Karen Ignagni says private insurers would almost certainly pass cost increases to consumers for a number of reasons, including her claim that too many people with pre-existing conditions would sign up for insurance. “The report makes clear that several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system,” she writes. Baucus calls the study “seriously flawed.” A spokesman for the Finance Committee, Scott Mulhauser, says: “Now that health care reform grows ever closer, these health insurers are breaking out the same, tired playbook of deception to prevent millions of Americans from getting the affordable, accessible care they need. It’s a health insurance company hatchet job, plain and simple.” (America's Health Insurance Plans 10/11/2009; NBC Washington 10/12/2009; Connally 10/12/2009) An analysis of the committee’s proposal by the Congressional Budget Office (CBO) shows that while some people’s premiums would go up, the subsidies to be provided by the government would make health insurance considerably less expensive for most consumers. According to the CBO, premiums under the government “exchange” option proposed in the Baucus bill would cost consumers $14,400 per year in 2016, while the average private insurer would charge their customers $21,300 by 2016. (Volsky 10/12/2009) Nancy-Anne DeParle, director of the White House Office of Health Reform, says PWC is not the firm to have carried out such a study. “Those guys specialize in tax shelters,” she says. “Clearly this is not their area of expertise.” (Connally 10/12/2009) Almost immediately after the study’s release, critics begin attacking it, calling it deeply flawed and an “industry hit job” (see October 11-12, 2009). And PWC itself will back away from the study’s central claims (see October 12, 2009).
Within minutes of the release of a new study by health insurance lobbying firm America’s Health Insurance Plans (AHIP) that claims health care reform would drastically raise costs to American families (see October 11, 2009), critics from different sides of the political divide dispute the study’s accuracy and question its impartiality.
White House: Study Ignores Key Elements of Reform - White House assistant press secretary Reid Cherlin says the study “conveniently ignores critical policies that will lower costs for those who have insurance, expand coverage, and provide affordable health insurance options to millions of Americans who are priced out of today’s health insurance market or are locked out by unfair insurance company practices.” (Weinberg 10/12/2009)
'Blowback' from Study Possible - White House and Senate officials say that the insurance industry may suffer “blowback” over the report. Democrats may well close ranks behind either the Senate Finance Committee (SFC) bill or another version of the legislation, and liberal lawmakers may go after the insurance companies, maybe by proposing a cap on premiums or solidifying support for the government insurance plan. “They have opened themselves up,” says a senior Senate Democratic aide. “It is an incredibly stupid strategic blunder. If you are going to fire a shot like this, you fire a good shot.” Former industry executive Wendell Potter, who has become an industry whistleblower (see July 10, 2009), says AHIP is responding to critical analyses from Wall Street that the legislation will hurt private insurers. “Karen [AHIP official Karen Ignagni] had no alternative because the CEOs were so determined to do something to try to sway the committee to back off the reductions,” he says. “She didn’t have an alternative. They are obviously doing this on the eve of the vote in the Senate Finance Committee, hoping enough members of the committee would be concerned, to restore it. I think the strategy will backfire.” (Brown 10/12/2009)
Economist: Study Fundamentally Flawed - MIT economist Jonathan Gruber analyzes the PWC study and concludes that it is fundamentally flawed. He writes: “The nonpartisan analysis based on information from the CBO [Congressional Budget Office] shows clearly that for those facing purchase in the non-group market, the SFC bill will deliver savings ranging from several hundred dollars for the youngest consumers to over $8,500 for families. This is in addition to all the other benefits that this legislation will deliver to those consumers—in particular the guarantee, unavailable in most states, that prices would not be raised or the policy revoked if they became ill.” On MSNBC, Gruber notes: “If the report had came out and said, ‘look we need stronger penalties, or premiums will go up,’ that’s a very valid point to make. But what the report says is that it went too far. It said with the current structure, premiums will be much higher than they are today. And that’s just wrong. I mean, the nonpartisan Congressional Budget Office has came out and said that for this bill, premiums in the exchange will be lower than they are in the none group market today. So they just drew the wrong comparison.” (Massachusetts Institute of Technology 10/12/2009; Volsky 10/13/2009)
Democrats: Proof that Industry Needs Further Regulation - Representative Anthony Weiner (D-NY) says, “[T]he health insurance lobby today fired the most important salvo in weeks for the public option,” and adds that the study proves the industry needs further regulations imposed on it by Congress: “If you have the health care industry complaining that we’re going to raise costs because of these changes, it is them putting us on notice that we haven’t put enough cost containment in the bill. You know, the health care industry themselves is putting out a whole report saying that. That should be a tell to the [Senate Finance Committee] that you know what, maybe it’s time for them to go back and revisit the public option. In a strange way, and look, obviously they didn’t mean this, the health insurance lobby today fired the most important salvo in weeks for the public option, because they have said, as clear as day, left to their own devices, according to their own number crunchers, they’re going to raise rates 111 percent.” (Volsky 10/12/2009) Senator John D. Rockefeller (D-WV) charges the insurance industry with releasing a false study for political purposes. “The misleading and harmful claims made by the profit-driven insurance companies are politicking for corporate gain at its worst,” he says. “Their recent statements only further highlight that our focus here in Congress must be on the inclusion of a public health insurance option in the marketplace to protect families and put more money back in their wallets by creating greater competition and driving down costs.” (Brown 10/12/2009)
Washington Post: 'Industry Hit Job' - The Washington Post’s Ezra Klein calls the report “deceptive” and “a predictable industry hit job,” and notes that the study was produced by accounting and services firm PriceWaterhouseCoopers (PWC), which in the 1990s was commissioned by the tobacco industry to do a study on the economic catastrophe that would result from taxing tobacco products. That study was found to be unreliable, and, perhaps not surprisingly, made all of its errors in favor of the tobacco industry. Klein writes that the same effect can be observed in this report on health care. He concludes: “But if the [study] doesn’t offer much in the way of trustworthy policy analysis, it is an interesting looking at the changing politics of the issue. In short, the insurance industry is getting scared. After many months of quiet constructiveness, they’re launching a broadside on the week of the Senate Finance Committee’s vote. The White House, which had a pleasant meeting with the industry’s leadership last week, was shocked by the report, and so too was the Senate Finance Committee. The era of cooperation seems to be over, and they weren’t given much advance warning. But the report might have another impact, too: The evident anger and fear of the insurance industry might do a bit to reassure liberals that this plan is worth supporting, after all.” (Klein 10/12/2009)
New Republic: 'Questionable Assumptions' - The New Republic’s Jonathan Cohn chastizes PriceWaterhouse for deliberately, and explictly, choosing to believe that all the new factors included in the study will raise costs, when other analyses show that many of those factors will actually drive costs down. Cohn writes that the study is based on a plethora of “strange [and] questionable assumptions.” (Cohn 10/11/2009)
Progressive Columnist: 'This Is News?' - Progressive columnist Josh Marshall wrote before the study was released: “Let me get this right. The big news tomorrow is that ‘America’s Health Insurance Plans’ (AHIP, aka the health insurance lobby) has commissioned a study by PriceWaterHouseCoopers that comes to the conclusion that the Senate Finance Committee bill is a bad, bad thing and would lead to health care costs going up even faster than they are under the current system. This is news?” (Marshall 10/12/2009)
Washington Times: Defending the Study, Attacking the CBO - The conservative Washington Times defends the study as essentially accurate, and instead attacks the Congressional Budget Office, whose own figures differ dramatically from the PWC study. The Times editorial board calls the CBO’s estimates “fanciful” and “grandly overoptimistic,” and accuses the Democrats of adding opportunities for consumers to “game the system”—“It’s a mystery how the CBO can make its evaluation without once mentioning that individuals easily will be able to go without insurance while they are healthy and then buy insurance after they get sick.” The entire proposal allows Democrats to “avoid electoral accountability over the urgent health care needs of the people they say they’re trying to help but won’t.” (Washington Times 10/12/2009)
AHIP Defends Study - Ignagni defends the study and says the lobbying firm did not release it to undermine the Finance Committee’s attempt to craft an acceptable reform bill. She says the industry’s main concern is getting everyone involved in health care to work together to bring costs down. There is a strong need, she says, to “encourage all the other stakeholders to participate in a broader effort so that they can too lend a hand and get costs under control in a much more effective way than we would.… We don’t see comprehensive cost control in any legislation.” (Weinberg 10/12/2009)
PWC Backs Off from Study - Late in the evening, PWC issues a statement noting that the study only examined “a small slice” of the health care reform initiative, and saying that if other provisions in the reform package succeed in lowering costs, then the estimates of cost increases claimed in the study would be inaccurate (see October 12, 2009).
PriceWaterhouseCoopers (PWC), the services and accounting firm that recently released a controversial study funded by the health care insurance lobbying firm America’s Health Insurance Plans (AHIP—see October 11, 2009 and October 11-12, 2009), backs away from claims that the report is comprehensive. Politico’s Chris Frates writes that the statement “basically sa[ys], ‘Hey, we weren’t paid to evaluate the effects of the entire bill, but rather a small slice of it.’ The statement only seems to reinforce critics’ view that the report is skewed precisely because it doesn’t take into account the totality of reform.” PWC’s statement concludes, “If other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated.” Frates explains, “In other words, PWC is saying if reform’s cost containment measures work, their estimate could be wrong.” (Frates 10/13/2009)
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