Insurance Death Spiral

A blog posted by James C. Capretta of the National Review Online addresses what he views as a crucial flaw in the plan sponsored by Finance Committee Chairman Max Baucus. He claims the health-care plan approved this week by the Senate Finance Committee would lead to an insurance death spiral. He defines this as occurring when regulators force insurers to offer coverage at premiums below the known risk of those they are insuring, without insurance that the shortfall can be made up elsewhere. I feel that his audience here are other Republicans as well as those not well informed on the financial impact on individuals but more so on the private health care market.

Mr. Capretta does provide full disclosure that he does consulting work for private health insurance and one may argue that he has vested interest in posting such a blog that may be partial in that his clients are the health insurers but he provides what I feel are irrefutable third party findings that support his view. In a Price Waterhouse Coopers study, it points to four provisions included in the Senate Finance Committee proposal that could increase private health insurance premiums above the levels projected under current law:
1.) Insurance market reforms coupled with a weak coverage requirement
2.) A new tax on high-cost health care plans
3.) Cost-shifting as a result of cuts to Medicare
4.) New taxes on several health care sectors

The study provides analysis that supports the key finding that overall impact of these provisions will be to increase the cost of private insurance coverage for individuals, families, and businesses above what these costs would be in the absence of reform. Looking out 10years, on average, the cost of private health insurance coverage will increase 79 percent between 2009 and 2019 under the current system and by 111 percent during this same period if these four provisions are implemented.

He urges that instead of focusing on 'universal coverage' and addressing how their plan would not have the same fate of some failed state reforms by forcing young and healthy to purchase insurance, he would like to see Democrats working alongside Republicans on a sensible plan to introduce reforms that would inject more market discipline into the health sector, thus making coverage more affordable for everybody. By passing the Baucus bill, he feels that Congress will be dealing with new issues and could be bailing out the private insurers in a couple of years.

I couldn't agree more with Mr. Capretta's view and with the findings of the Price Waterhouse Coopers study, I shouldn't be forced to pay tax penalty if I can't afford the more expensive plan. He has my attention and I feel these findings and his comments should be heard by all.