PriceWaterhouseCooper Airstike on the Senate Vapor Bill

In a memorandum to her members, Karen Ignagni summaries the PriceWaterhouseCooper report on what would happen to the private sector health insurance market.

Ignagni’s memo is quoted below:

“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. The report finds that the proposal “will increase premiums above what they would increase under the current system for both individual and family coverage in all four market segments for every year from 2010-2019.”

For example, the analysis shows that the cost of the average family policy is approximately $12,300 today and will rise to:

* $15,500 in 2013 under current law and to $17,200 if these provisions are implemented.
* $18,400 in 2016 under current law and to $21,300 if these provisions are implemented.
* $21,900 in 2019 under current law and to $25,900 if these provisions are implemented.

In fact, between 2010 and 2019 the cumulative increases in the cost of a typical family policy under this reform proposal will be approximately $20,700 more than it would be under the current system.

Key drivers of rising costs analyzed in the report include:

* Market reform enacted in the absence of universal coverage will increase costs dramatically for many who are currently insured by creating a powerful incentive for people to wait until they are sick to purchase coverage. Since proposing health insurance reform in 2008, AHIP has provided data showing that market reform needs to be paired with an effective personal coverage requirement to ensure affordability and minimize disruption for those currently insured.

* As noted previously by the Congressional Budget Office, the new taxes on health insurance plans, medical device makers, and pharmaceutical manufacturers will result in increased costs for individuals, families, and employers. We are making the point that health care taxes will add to, rather than reduce, rising medical costs.

*Record reductions in Medicare spending will raise costs as providers shift even more costs to individuals, families, and employers with private coverage.

*Taxes on high-value health plans will raise the cost of employer-based coverage, particularly for companies with older workforces and those whose benefit plans have been secured through collective bargaining agreements.

On the subject of a government-run plan’s impact on costs, PwC notes that: “Since government-sponsored programs have traditionally paid providers less than the private sector, as enrollment in a government-run plan increases, hospital revenue margins may decrease and consequently accelerate further cost shift. This would likely lead to increasing payment differentials between the public and private payers and the potential for further spiraling as private sector enrollees, facing continuously higher premiums leave the market.”