FOR IMMEDIATE RELEASE
April 2, 1999
Dear Representative Ganske:
The Health Benefits Coalition respectfully disagrees with your interpretation of the 1998 Congressional Budget Office (CBO) estimate of comprehensive managed care reform legislation. Your interpretation of the estimate is not supported by CBO’s cost analysis itself, or by how CBO analysts have explained it.
CBO clearly stated, and it was so reported by the media, that insurance premiums for employer-sponsored health plans would increase by an average of 4% once all provisions of the legislation were fully phased-in. The fact that CBO assumed a ten-year window for phasing-in all provisions (driven largely by the clinical trials provision) does not mean that the 4% increase would be spread out over ten years, neatly divided into 10 increments so that the "annual effect would be less than 0.5%," as you state.
Instead, CBO said that once all the provisions of the legislation take effect, costs would increase that year by 4% (not 0.5%) and be carried forward in the following year’s premium and from that point on. In fact, most of the 4% premium increase that CBO predicts can be expected to occur very shortly after Congress acts, not over 10 years. Most of the provisions would go into effect soon after Congress enacts the legislation.
As our TV advertising correctly assumes, a 4% increase in the cost of a typical family’s annual health insurance coverage would be more than $200. Towers Perrin estimates that the average reported 1999 cost of family coverage is $5,652 a year. A 4% increase in that average is $226.00.
If anything, CBO under-estimates the cost impact of these reforms because they provide broad, national average estimates and do not take into account the fact that increases in health insurance premiums are typically much higher for small businesses—who already pay more for health care than large employers. For these employers, in particular, the impact of this legislation would be anything but "minimal," as you call it.
The Health Benefits Coalition stands behind its use of CBO cost estimates of managed care reform as factually correct and fairly presented. We have no intention of pulling our ads. Indeed, we believe more firmly than ever that the American people have a right to know that managed care reform will cost them more money and result in millions more uninsured Americans.
Sincerely,
Dan Danner
Chairman, the Health Benefits Coalition
