Because of the health care law, "by 2017, we will be funneling over $100 billion annually to private insurance companies." — Michael Moore in an op-ed Jan. 1 in The New York Times
Because of the health care law, "by 2017, we will be funneling over $100 billion annually to private insurance companies." — Michael Moore in an op-ed Jan. 1 in The New York Times
Populist filmmaker Michael Moore kicked off 2014 with some harsh words for President Barack Obama. In a New York Times op-ed, Moore called Obama’s signature health care law “awful.”
“The Affordable Care Act is a pro-insurance-industry plan implemented by a president who knew in his heart that a single-payer, Medicare-for-all model was the true way to go,” Moore said. “By 2017, we will be funneling over $100 billion annually to private insurance companies.”
We have consistently found that, contrary to the claims from the president’s critics, the newly implemented law is not a government takeover of health care. Instead, it drops a layer of regulations and subsidies on top of the existing private-sector system. While that generally supports Moore’s contention that the government is sending lots of dollars to private insurance companies, we wanted to dig further into the specifics.
Moore’s staff directed us to an analysis by the Congressional Budget Office, the nonpartisan number crunchers who help Congress assess its choices.
The money Moore has in mind represents the subsidies the federal government is offering to make health insurance more affordable for millions of people. Many individuals who buy coverage through either the federal or a state marketplace, at prices set by insurers, will be eligible to receive tax credits that lower their premium costs.
There are a couple of ways the money can make it to private insurers that offer the plans. The government might transfer the funds directly to the company, or the customer might pay and then get a tax credit at the end of the year.
The $100 billion number Moore cited in The New York Times is off, but just slightly, said Josh Fangmeier, a health policy analyst at the Center for Healthcare Research and Transformation at the University of Michigan. A more accurate figure is $95 billion.
The subsidies, which have the effect of lowering premiums, “will increase demand for coverage, and insurance companies will likely benefit from this by gaining more customers,” Fangmeier said.
The CBO figures there will be 20 million people getting subsidies in 2017.
That’s a fair bit of new business for private insurers, but Scott Harrington, a professor of health care management at the University of Pennsylvania’s Wharton School, said no one should confuse revenue with profits. “At least 80 percent” of the new money will pass through the insurance companies’ hands, Harrington said, and “go directly toward paying medical claims for enrollees.”
Still, Harrington said there will also be new customers who buy without subsidies because the law requires all citizens to have insurance.
At least some of the largest insurance companies speak of the Affordable Care Act as an opportunity, not a threat. In October, Joseph Swedish, the chief executive officer of Wellpoint, gave this upbeat summary:
“Today we are raising our 2013 membership and earnings-per-share guidance, reflecting our strong performance, our continued preparation and the outlook for coming market changes under the Affordable Care Act.”
Wellpoint and another large insurer, UnitedHealth Group, emphasized that nothing is guaranteed and warned that the Affordable Care Act could cut into profits. Those cuts would likely come in the next couple of years, according to UnitedHealth Group, which also said its projections beyond that are positive.
In one respect, the government takes back part of what it offers insurers. The overall plan raises billions in taxes and fees. In 2017, the government expects to collect about $11.4 billion from insurers. Most analysts, including the CBO and America’s Health Insurance Plans, an industry trade group, expect companies to pass those costs on to consumers.
The health care law also phases out subsidies in place today that make the Medicare Advantage program more lucrative for insurers.
Whether insurance companies will profit is a matter of debate. Chris Conover, a health policy analyst at Duke University, says the subsidies are “simply a pure pass-through on which insurers make zero profit.”
But Fangmeier pointed to work by the Urban Institute, which projected that for different age groups, sometimes premiums would tend to be higher than health care claims and sometimes they would be lower. Fangmeier said the companies could “at least break even.”
A final note: Both Fangmeier and Conover emphasized that the federal government already heavily subsidizes the health insurance industry through unique tax rules for employer-sponsored coverage. The employer can take the share it pays of the premiums as a deduction, while the worker gets the benefit tax-free. In 2017, the Joint Committee on Taxation estimates that will cost the government $171 billion, much more than the subsidies paid through the Affordable Care Act.
Our ruling
Moore said that in 2017, Obamacare will funnel more than $100 billion to insurance companies. The analysts we contacted told us $95 billion would be a more accurate figure, so Moore overshoots a bit. He characterized Obamacare as a pro-insurance industry program, which might lead some people to think that insurers would pocket all the money. That clearly won’t happen because the companies will pay for care, and also because insurers might need to absorb a portion of about $11.4 billion in new taxes.
What happens to the bottom line of insurance companies is somewhat uncertain.
Here, we’re focusing only on the specifics of Moore’s claim — which is largely accurate. We rate it Mostly True.
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