The Fed's latest news has prompted another round of what-ifs.
In December 2008, just after Barack Obama was first elected president, the insurance industry lobby group AHIP offered what it termed a "comprehensive reform proposal" aimed at combating critics who saw the industry as a leading obstacle to overhauling the health care system. Though the industry did not ultimately support the passage of the final version of the health care law (citing its lack of cost containment), insurers did not actively fight against the legislation as they did during President Clinton's health care push.
In the end, many key elements of AHIP's December 2008 proposal became law, such as the mandate forcing all individuals to purchase insurance. In addition, AHIP backed insurance subsidies for Americans earning up to 400 percent of the federal poverty level.
Most major provisions of President Obama's national health care law don't technically go into effect until 2014, but they are already being felt in the health insurance market -- and Obama's re- election has prompted insurers to begin adapting to the coming world under Obamacare. Now, AHIP is aggressively campaigning against several elements of the law that are driving up premiums. The issues of most concern to AHIP are the $100 billion health insurance tax, the requirement that all policies offer a package of minimum benefits specified by the federal government and restrictions on how much premiums can vary on the basis of age.
All of these provisions will drive up premiums by varying amounts. Like most taxes on goods and services, the health insurance tax will mostly be passed on to consumers in the form of higher premiums. The minimum-benefits requirements will drive up premiums on individuals who have chosen cheaper, less generous health plans. And the restrictions on age variation mean that young and healthy individuals will face higher premiums so they can cross-subsidize older and sicker patients.
The New York Times reported last weekend that "health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers." Last week, AHIP drew attention to a study released in a publication of the American Academy of Actuaries finding that "premiums for younger, healthier individuals could increase by more than 40 percent" as a result of the health care law.
Many of AHIP's new criticisms of the law are well-founded, but we find it difficult to shed tears for the insurers. The industry may decry government intervention now, but when it mattered, it was a strong proponent of government regulation and subsidies that benefit the industry. The health care law's insurance exchanges will provide 25 million new customers to private insurers, who will receive $1 trillion in federal subsidies. Millions more Americans will be forced to purchase insurance to comply with the individual mandate and buy the companies' products.
AHIP spokesman Robert Zirkelbach pushed back against charges of hypocrisy. "We've always supported a market-based approach," he told us. "The whole reason we're raising these issues now is that we think it's important to have a marketplace that's going to maximize choice and competition." The industry supported the mandate, he said, because it would be the only way to make the ban on pre- existing conditions workable.
This demonstrates how dangerous and short-sighted it is for big businesses to back government intervention. The long-term problem for the insurance industry is that if premium growth accelerates under Obamacare, interventionists will point to it as proof that the private insurance industry is irreparably broken and that a government-run system is needed. When this happens, AHIP will have helped dig its own grave.