The Center for Public Integrity

With April 15 approaching, some small business owners who provide health coverage to their workers are not going to be as indebted to Uncle Sam as they have in years past, thanks to Obamacare. That’s right, thanks to Obamacare.

Mike Roach, owner of Paloma Clothing, a women’s clothing store in Portland, Oregon, is among them. He is one of several hundred thousand small employers who have taken advantage of a provision of the reform law that provides a substantial tax credit to companies that offer health insurance to their employees. And not only is Roach able to save money, now that he’s offering coverage, he’s no longer losing valued employees to large department stores that have long provided benefits as a recruitment tool.

Roach had always wanted to offer coverage to his 12 employees but had found the premiums too steep. He said the message he kept getting from insurance companies was, “We don’t really want your business, but we will do business with you as long as we can gouge you.”

Small businesses like his have always had to pay considerably more for the same coverage as large employers. At big companies with hundreds or thousands of workers, insurers’ and employers’ risk is spread across a much larger “pool” of people. A few employees getting sick or injured in a given year at a big company would have a negligible effect on the risk pool.

Not so at a shop like Roach’s with just a dozen workers. Small business owners pay more because underwriters at insurance companies know that if just one worker at a small business gets sick, the insurer could wind up losing money on the account. Small businesses also lack the bargaining power of large firms.

As a consequence, more and more small companies have dropped coverage in recent years while big employers have continued to offer it.

Those accustomed to obtaining health insurance through the workplace and choosing among different types of policies may be in for a rude surprise.

Increasingly, employers of all sizes are eliminating choice and offering only high-deductible plans — euphemistically referred to in the insurance world as consumer-directed health plans or HDHPs.

The looming shift has nothing to do with Obamacare or even the widely held belief that certain types of health plans will encourage people to give up costly bad habits like smoking. It is about profit.

The trend appears to be irreversible. Within the next few years, most Americans not only will find that the plans they’ve been enrolled in for years are no longer available, but that they will also have to pay much more out-of-pocket for medical care.

There were many reasons why I left my job in the insurance industry, but near the top of the list was the expectation that I be, for all practical purposes, a snake oil salesman. If I were still in the business, I would be part of an industry-wide campaign to persuade employers, policy makers and the general public that high-deductible plans are the new silver bullet.

Not only will HDHPs reduce health care costs, according to the campaign propaganda, forcing people into them will cause them to lead healthier lifestyles.

That’s the hype. And the hype is necessary to obscure the real reason insurers and employers are herding more and more of us into HDHPs: they’re perfect vehicles to shift more of the cost of care from them to us.

Even in 2008, the last year I worked for an insurance company, my colleagues in the sales division were encouraging employers to go “total replacement,” which means eliminating all choices except high-deductible plans. Insurers have long used proprietary “studies” supposedly proving that making people pay more out of pocket for medical care will “incentivize” them to lead healthier lives.

We’re just a bit more than six months away from when Americans will have to begin making decisions about purchasing health insurance, but, according to a survey released last week, more than two-thirds of people who are currently uninsured don’t have much of a clue how Obamacare will affect them, including the fact that coverage will soon be mandatory.

On October 1, as required by the law, states must have online insurance marketplaces (known as exchanges) up and running so their residents can shop for coverage. Some states will be operating the exchanges on their own, but most have decided to either partner with the federal government to operate them or have the feds do all the work.

After October 1, the next most important date Americans need to know about is January 1, 2014. That’s when the mandate to have coverage goes into effect.

Making sure Americans become aware of that mandate and sign up for coverage before the end of the year will be an enormous undertaking, which is why Obamacare also includes a provision authorizing a broad range of organizations to serve as “navigators” to educate people about the law’s requirements and help them find plans that meet their needs.

The law states that entities eligible to be navigators — and to receive government grants to do the navigating — include “ trade, industry, and professional associations, commercial fishing industry organizations, ranching and farming organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, resource partners of the Small Business Administration, other licensed insurance agents and brokers, and other entities” the Feds deem capable.

Recently I was one of three witnesses to testify before a House committee hearing on whether the cost of health insurance will be higher or lower for people who cannot obtain it through their employer when important provisions of the Affordable Care Act go into effect in a few months.

I cited studies that indicate the overall cost of coverage — premiums plus out-of-pocket obligations — will be lower. The others on the panel — Douglas Holtz-Eakin, who was director of the Congressional Budget Office during the Bush Administration, and Christopher Carlson of the actuarial firm Oliver Wyman, cited their own studies that indicate costs could be higher for some young adults who have benefited over the years from the prevalent insurance industry practice of charging older people up to 10 times as much as they charge younger folks.

Insurers will not be able to do that much longer. Beginning January 1, they’ll be prohibited from charging someone more than three times as much for insurance as anyone else for the same policy.

Congress would have been better served, in my opinion, if the witness list had included Jim Elder, a retired small business owner from Florida who I interviewed last week as I was preparing for my testimony and this column.

He would have been a better witness than all three of us combined, hands down. That’s because his story would have served as a real-world reminder of just how unaffordable — and even unavailable — health insurance has become for average middle-class Americans who have done nothing wrong other than get sick.

Jim Elder might not be a widower today had premiums for the health insurance coverage he was providing for his family and his employees not become so unaffordable after his wife was diagnosed with breast cancer that he had no option but to drop coverage for everybody.

Facing government cuts to one of their cash cows—private Medicare plans—health insurance companies have launched a multi-pronged campaign, financed by the customer premiums, to persuade Congress to keep the cuts from going into effect next month.

The industry’s big PR and lobbying group, America’s Health Insurance Plans, is deploying the tactics I described in Deadly Spin to scare seniors into believing that if the federal government stops overpaying insurers that offer Medicare Advantage plans (the private alternative to the traditional government-run Medicare program) seniors will “pay more, get less and lose choices.”

“U.S. Health Insurers Launch TV War Over Medicare Advantage Cuts,” read the headline of a Reuters story last week when AHIP’s ads started running.

At issue is a 2.3 percent cut in payments to Medicare Advantage plans by the Centers for Medicare and Medicaid Services (CMS) that are scheduled to go into effect on April 1.

The industry’s campaign, of course, conveniently leaves out the fact that the government has been overpaying private insurers for years and that the cuts being proposed starting next month are part of a broader effort to put a stop to those overpayments.

Members of Congress inserted a provision in the Affordable Care Act to reduce the overpayments by $200 billion over the next several years.  The 2.3 percent cut would be in addition to that.

It makes little sense for the government to overpay private insurers in the first place, but that is exactly what’s been going on for several years. During the administration of George W. Bush, which supported the privatization of the Medicare program, Congress passed legislation to provide incentives to insurers to offer private plans to compete with traditional Medicare. This enabled the plans to offer richer benefits than traditional Medicare at little or no additional cost to beneficiaries while also making a tidy profit.

One of the reasons Americans are still confused about the Affordable Care Act is the ongoing misrepresentation of the law by members of Congress who voted against it.  This obfuscation isn’t confined to what the law actually does or doesn’t do, but also to what impact it might have on the federal deficit in years to come, as a vocal critic of the law demonstrated last week.

Jeff Sessions of Alabama, the senior Republican on the Senate Budget Committee, recently asked the nonpartisan Government Accountability Office to look decades into the future and let him know if the reform law will cut the deficit over time,  as President Obama says it will.

The GAO got back to Sessions last week with budgetary simulations showing that the ACA will indeed reduce the deficit if it’s implemented as Congress intended.

Probably anticipating that answer, Sessions asked the GAO to do an alternative simulation showing what might happen if the law isn’t implemented as Congress intended. What would happen, in other words, if future lawmakers repeal all of the cost-saving and revenue-generating provisions of the law or phase them out?

It doesn’t take an army of actuaries to figure out that if the parts of the law expanding coverage go forward, but the parts that pay for it or that reduce spending do not, Obamacare will add to the deficit.

Within hours of getting the report, Sessions accused President Obama of misleading the country.  Obamacare, he said, will add a whopping $6.2 trillion to the deficit.

What Sessions was doing was engaging in a practice common in politics and propaganda—“statisticulation.” If you haven’t come across that word before, check out How to Lie with Statistics by Darrell Huff, a classic that’s as relevant today as it was when first published in 1954.

A recent story out of Oklahoma shows just how vital investigative journalists are—and how health insurance agents and brokers may be anything but vital in just a matter of months.

For decades, many individuals and small business owners have sought out the help of agents and brokers — known as “producers” in the insurance world — to help them find coverage for themselves, their families and their employees. 

People have had to do this because, until recently, the information provided by insurance companies about their policies has been incomprehensible. Producers — they’re called that because they “produce” business and, consequently income, for insurance companies — have been the middlemen many of us have relied upon to interpret benefit plans and advise us on what to buy.

As a result, our premiums are higher than necessary because insurance companies pay agents and brokers a lot of money in commissions to “produce” the business they want: young and healthy people who are not very likely to need much medical care. And insurance companies pass along the cost of those commissions to policyholders.

The need for producers’ services diminished earlier this year when an important provision of Obamacare kicked in. Insurance companies can no longer get away with descriptions of plans so complicated you need a third party to decipher. They now have to provide prospective customers with information in simple language and in a format that enables us to make apples-to-apples comparisons among various health plans.

The producers’ world will be rocked even more on October 1 when the states’ online health insurance marketplaces — or “exchanges” — will be up and running as mandated by the reform law. And this is where that Oklahoma story is so enlightening.

If you watched President Obama’s State of the Union address last week, you might have missed the scheme he unveiled that will lead to the ruination of the Medicare prescription drug program, destroy pharmaceutical companies’ incentive to develop new life-saving medicines and even imperil our country’s economic growth.

I know I missed it.

Fortunately, the top PR guy at the drug companies’ big trade association in Washington quickly issued a press release to clue us in on what the President is really up to and what will happen if he can follow through on his pledge to curtail Medicare spending by reducing “taxpayer subsidies to prescription drug companies.”

Here’s what Matthew D. Bennett, senior vice president of communications and public affairs at Pharmaceutical Research and Manufacturers of America (PhRMA), wrote within hours of the speech:

“The President’s proposal to tamper with a program that works well would not yield any benefit for seniors. Instead, analysts have projected that the President’s scheme would harm Part D’s competitive dynamics, yielding higher premiums, more restrictive access to medicines, and diminished research on the next generation of medicines.”

So what is Bennett so worked up about? The White House said after the speech that the President intends to ask that drug makers help the government cover the prescription costs for a group of Americans referred to as “dual eligibles.” Of the approximately 50 millions Medicare beneficiaries, about a fifth are also eligible for Medicaid because of their low incomes. 

It’s no surprise that American corporations spend billions of dollars each year on lobbying, trying to gain favorable treatment from legislators. What some may find a bit unnerving is the industry that’s leading the pack in these efforts.

You might think our nation’s defense and aerospace companies, which have legions of hired guns on Capitol Hill, are the leaders.  Or perhaps Big Oil, which is perpetually fighting  with environmentalists and consequently needs friends in Washington to block what it considers onerous legislation or regulations.  

In both cases, you’d be wrong. It’s actually the pharmaceutical industry that spends the most each year to influence our lawmakers, forking over a total of $2.6 billion on lobbying activities from 1998 through 2012, according to OpenSecrets.org. To get some perspective on just how big that number is, consider that oil and gas companies and their trade associations spent $1.4 billion lobbying Congress over the same time frame while the defense and aerospace industry spent $662 million, a fourth of Big Pharma’s total.

(Number two on the OpenSecrets list, by the way, was my old industry, insurance, which spent $1.8 billion. Although health insurers were among the biggest spenders, the list also includes property and casualty and auto insurers.)

 The huge sum of money our nation’s drug makers lavish on Congress each year begs the question, what are they seeking in return? Surely it has something to do with the fact that our nation’s legislators turn a blind eye as pharmaceutical companies engage in predatory pricing practices while enjoying exclusive rights to manufacture drugs for 20 years or more. All at the same time that drug costs and drug price inflation are among of the main drivers of health care costs for individuals and families and threaten the fiscal health of our public health care programs.  

If you wonder why we spend more money on health care than any other country  but have some of the worst health outcomes, you need look no further than the halls of Congress to figure out why that is.

And you need look no further back than the recent “fiscal cliff” drama for compelling proof of how decisions are often made, not based on protecting the public’s interest and bringing costs down, but on protecting the profits of pharmaceutical companies, insurance firms and other special interests that grease the palms of our elected officials.

Drug makers have long had cozy relationships and outsized influence on lawmakers in Washington. That’s why ObamaCare  barely touches that industry. Big Pharma essentially blackmailed members of Congress and the White House by threatening to bankroll a huge PR and lobbying campaign to kill health care reform if serious consideration was given to allowing Medicare officials to negotiate for lower drug prices.

We hear constantly from lawmakers about how unsustainable the Medicare “entitlement” program is,  yet when they had a chance to make a difference in how much Medicare has to shell out to drug makers, they looked the other way. Taxpayers could save billions of dollars a year if Medicare didn’t have to pay so much for drugs, but drug companies have much more clout on Capitol Hill than taxpayers.

So much clout that one big drug company—Amgen—was able to get language quietly inserted in the fiscal cliff bill that will cost the Medicare program millions of dollars.

Buried deep in the legislation is language that delays long-proposed price restraints on a class of drugs used to treat kidney dialysis patients. That paragraph allows Amgen to sell one of its high-priced drugs, Sensipar, with no government controls for two more years—at a cost to the Medicare program of an estimated $500 million.