September 26, 2009

September 26, 2009 | Commentary on Health Care Reform

Promises vs. Reality

President Obama made three prominent promises during his campaign: (1) If you like your health plan, you can keep it; (2) your health plan would cost about $2,500 less; and (3) if you make less than $250,000 per year, your taxes won't go up.

All three promises would be violated if the president signed any of the health care reform proposals introduced by the Democrats in Congress.

Consider the House bill (H.R. 3200). A quick look at pages 16-29 (Section 102) makes it clear that only a few people will be able to keep their current health plan -- and even then only under extremely restricted conditions.

This section opens with the promising title, "Grandfathered health insurance coverage defined." It states that "individual health insurance coverage that is offered and in force and effect" before the bill comes into effect can be renewed indefinitely. Then it proceeds to state the exceptions, which seem to cover almost everybody, eventually.

First, "individual health insurance coverage" means coverage you buy yourself, rather than through your employer. That covers only about 8 percent of Americans. Employer-sponsored health plans, which cover most Americans, are given a five-year "grace period" (page 17) to comply with the regulations, restrictions and mandates of the "health choices commissioner" -- a new position occupied by the person who will make health choices for the entire nation.

These "choices" could include services that must be covered, services that may not be covered, and minimum or maximum deductibles and co-payments. Almost none of the details are specified in the bill, and the commissioner would have wide authority to structure health plans at his or her discretion.

Once "your plan" complies with all of these new requirements, it may be substantially different from what it is now. So if you like your plan, you will be able to keep it -- but in name only. And you might not like it anymore.

After the law takes full effect on Jan. 1, 2013, it will become illegal to sell individual health insurance except through the newly created "health insurance exchange." Plans sold through the exchange will have to comply with the regulations of the health choices commissioner.

However, if you buy health insurance on your own through the "individual market" rather than through an employer, you can indeed keep your plan -- provided absolutely no changes are made, except the addition of dependents for the primary policy holder and changes "required by law." You will not be able to upgrade to a better version of your plan or downgrade to a cheaper one.

Once your children cease to be your dependents, they lose the right to stay on your plan. Divorcing spouses of primary policyholders will lose the right to keep their plan. If the primary policyholder dies, the surviving spouse and children will lose the right to keep their plan.

And since it's currently illegal to sell health insurance across state lines, people who move to a different state lose the right to keep their plan. All of these people will end up having to buy insurance approved by the health choices commissioner through the government exchange.

Obama's second promise was that the average family's health insurance would cost less, by about $2,500. Nothing in any of the health reform bills indicates that premiums will go down. Indeed, there are many reasons to believe they'll go up.

More realistically, the health commissioner, as advised by the 25-member Health Benefits Advisory Committee, representing all types of health providers, will impose substantial new mandatory benefits, each of which will increase your premiums, whether you want those benefits or not.

Obama's third promise was that no one who makes less than $250,000 would be protected from any tax increase. This is explicitly violated. The House bill requires employers who don't provide insurance to pay an 8 percent payroll tax as a penalty (page 149). This money has to come from somewhere, and at least some of it will come in the form of reduced wages.

But this will go toward the health insurance for employees in the government system, right? Wrong. The bill specifically says the tax "shall not be applied against the premium of the employee under the Exchange-participating health benefits plan in which the employee is enrolled." Since low-wage employers are less likely to offer insurance, this tax will disproportionately affect low-wage workers--those least able to pay.

In short, if health care reform passes in its current form, you will almost certainly not be able to keep your current health plan, you will pay a higher premium, and if you are a low-income worker, you will pay higher taxes.

This is "change," all right. But hardly the change Obama promised.

Robert A. Book, Ph.D., is Senior Research Fellow in Health Economics in the Center for Data Analysis at The Heritage Foundation.

About the Author

Robert A. Book, Ph.D. Senior Research Fellow in Health Economics
Center for Data Analysis

Related Issues: Health Care Reform

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