Independence Blue Cross shows its hand

Within the halls of Congress and among Pennsylvania's 19 members of the U.S. House, "the Blues" (Highmark, Blue Cross of NE PA, Capital Blue Cross, Independence Blue Cross) are opposing House passage of HR 3200, the health care reform bill pending before the U.S. House of Representatives.

Now, in a July 29th op-ed in the Philadelphia Inquirer, Joseph Frick, the president and CEO of Independence Blue Cross, has revealed what the Blues are up to: scare people with inaccurate information about the public health insurance option, which is an integral part of the House bill (H.R. 3200).

According to Frick, "A government plan would dismantle employer-based health coverage, undermining the president's pledge that people who like their health-care plans and doctors will be able to keep them.  Some estimates suggest that more than 119 million people would move to new government-run plan in its first year."

Actually, what the bill says is that employers that do not offer health benefits now would be able to shop for an employment-based health plan at an "insurance exchange".  This one-stop insurance shop would offer a variety of health plans, one of which would be backed by the U.S. government.  An employer could pick and choose which plan to buy, and if it had fewer than 25 employees, would receive tax credits to off-set the cost.

I ask you, does that sound like a plan to dismantle employer-based health coverage or to strengthen it?

The government-backed plan would only be available to employers that currently offer no coverage and to individuals who currently are uninsured. 

So what's this about "undermining the president's pledge that people who like their health-care plans and doctors will be able to keep them?" 

If every such employer and every uninsured individual in America bought the public plan, around 50 million would enroll.  But people will shop and will have diverse preferences.  The Congressional Budget Office looked at this question and projected that 10 million would enroll during the first three years the public option is available.

So what's this about "more than 119 million people would move to new government-run plan in its first year?"

Frick - who obviously is a very important person with a reputation to maintain - managed to squeeze three big distortions into one short paragraph.  What's going on here?

Competition!  That's right, the Blues are afraid they will lose market share to the public health insurance option.  Why would that happen?  Because the public option would have lower administrative costs, would not pay the huge salaries that the Blues executives receive, and would focus on keeping health insurance affordable.  Because of these features, the CBO estimates the public health insurance option would save $150 billion across the health system over the next ten years.

In addition, in a national insurance exchange, insurance companies would find it easier to operate in multiple states and compete in places (such as Pennsylvania) where competition is currently very limited.

The Blues love their dominant market share, as well they should!  A May report from Health Care for America Now showed that Pennsylvania's two largest health insurers, Highmark and Independence Blue Cross, control 72 percent of the market for commercial heatlh insurance.  Indeed, a closer look at Pennsylvania regions reveals that the degree of concentration is even higher than 72 percent; the southeast, northeast, and western regions are each dominated by one of the Blues companies.

Because of this lack of competition, health insurance premiums in Pennsylvania have soared, increasing 95 percent from 2000 to 2009.  Over that same time, median earnings for Pennsylvania's working families increased only 17.5 percent.

In short, Pennsylvanians have a lot to gain from a health reform plan (such as HR 3200) that includes a public health insurance plan.  The Blues, on the other hand, have a lot to lose. And while the Blues have every right to try to retain their market power at the top of the heap, they do not have the right to distort facts and confuse the public.  Too much is at stake!

For a report on the salaries paid to insurance company executives, including information about Frick's $2.6 compensation package, click here.