Expressing its disappointment in the latest piece of health care reform legislation in Washington, D.C., three national insurance trade groups are taking the Senate to task for its Patient Protection and Affordable Care Act.

The bill, authored by Majority Leader Harry Reid (D-Nev.), is expected to reach the Senate floor this weekend. The proposed bill will cost $848 billion over the next decade, and reduce the number of uninsured Americans by 31 million, according to the Congressional Budget Office.

Not surprisingly, the main target of the insurance industry is the bill’s inclusion of a government-run health insurance program to compete with private insurers. Industry groups railed against the inclusion of such a mechanism in a bill recently passed by the House and repeated their objections regarding the Senate version.

The Senate proposal allows states to opt-out of participation in a public option through legislation.

Robert Rusbuldt, president and chief executive officer of the Independent Insurance Agents & Brokers of America, said the public option would “unfairly compete” with private insurers and is “ample evidence that the federal government sets its own rules and there is nothing fair or level about them.

“We do not believe any state legislature or governor will ‘opt’ to take away an entitlement bestowed upon their citizens by the federal government and federal taxpayers,” Rusbuldt said in a statement. “Especially since the citizens of that state cannot ‘opt out’ of paying for the public option. Therefore, the ‘opt-out’ is not a viable compromise and it is synonymous with the ‘robust’ public option.”

Karen Ignagni

Karen Ignagni, president and chief executive officer of America’s Health Insurance Plans (AHIP), also decried the public option on behalf of the association’s 1,300 member insurers.

“This bill will also exacerbate the health care cost shift as health care providers offset reductions in public program reimbursements by charging more to families and employers who have private coverage,” she said. “The new government plan will cause even more cost-shifting and threaten the employer-based coverage with which Americans are overwhelmingly satisfied.”

The Blue Cross and Blue Shield Association (BCBSA) said not only would the public option be more expensive than what is currently offered, “but it also would jeopardize access to coverage for the 160 million people who receive their benefits through their employers today.

“Given the negative impact such a plan would have on both affordability and access, creating a government-run plan is misguided public policy that will compromise the impact of broader healthcare reform,” the association said on behalf of its 39 companies nationwide.

Taxing concerns

All three groups also took the Senate to task for the cost of the bill and its inclusion of taxes on “Cadillac” insurance plans, those plans worth more than $4,500 for individuals and $23,000 for families annually, and new fees for insurers.

“The new health care taxes and fees will raise the cost of coverage for individuals, families, and employers,” Ignagni said. “Health plans will be required to pay a $6.7 billion tax beginning next year for the next 10 years, in addition to ‘stabilization’ fees of $25 billion in 2014, 2015, and 2016.  According to Fortune magazine’s analysis of the companies listed under ‘Insurance and Managed Care’, earnings in 2008 totaled $8.61 billion with a profit margin of 2.2% – ranking the industry 35th on the Fortune list.”

The BCBSA said the inclusion of the $6.7 billion in annual taxes, as well as provisions allowing individuals to wait to buy coverage until they are sick and limiting age discounts for the young and healthy will not make health care more affordable.

“Any bill that raises costs for people buying coverage fails to pass the affordability test,” the organization said.