[Congressional Record Volume 144, Number 106 (Friday, July 31, 1998)]
[Senate]
[Page S9606]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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 ``PRIVATE HEALTH INSURANCE: IMPACT OF PREMIUM INCREASES ON THE NUMBER 
        OF COVERED INDIVIDUALS IS UNCERTAIN'' (GAO/HEHS-98-203R)

  Mr. JEFFORDS. Mr. President, today, I am releasing a new U.S. 
General Accounting Office (GAO) report entitled ``Private Health 
Insurance: Impact of Premium Increases on the Number of Covered 
Individuals Is Uncertain'' (GAO/HEHS-98-203R). In November, 1997, the 
Lewin Group published a study that estimates for every one percent 
increase in health insurance premiums, 400,000 people would lose their 
health care coverage. This GAO report assesses the methodology used in 
the Lewin Group report and evaluates the factors that could determine 
how premium increases relate to the number of individuals with health 
insurance coverage.
  Over the past 14 months, the Committee on Labor and Human Resources 
has held nine hearings on issues relating to health care quality and 
two hearings on ways to increase health insurance coverage. At each of 
these hearings, the point was made that proposed health care 
legislation could increase the cost of health care and have the 
unintended consequence of reducing the number of individuals covered by 
employer-sponsored health care.
  The GAO report found several problems with the original November, 
1997, Lewin Group estimate. GAO concluded that, based on a more recent 
Lewin Group report, if health insurance premiums increase by 1 percent 
for only some types of insurance (for example, HMOs), then the coverage 
loss would be less than 300,000.
  The first concern identified by the GAO with the November, 1997, 
Lewin Group report is that it was based on the effects of insurance 
premium subsidies on an employer's decision to offer insurance. The 
Lewin Group concluded from its studies that a one percent decrease in 
premiums would induce employers to offer coverage to an additional 
400,000 employees. The Lewin Group then assumed that this same 
relationship could be reversed to represent accurately the number of 
employees who would lose coverage if premiums increased. The GAO 
analysis concludes that a more important variable in assessing the 
impact on health insurance coverage is not whether an employer decides 
to offer insurance coverage, but whether an employee will choose to 
accept it.
  According to the Current Population Survey data, in 1996, about 70 
percent of the population under the age of 65 was covered by health 
insurance purchased through an employer or purchased privately. About 
12 percent of the population was covered by Medicare, Medicaid, or the 
Civilian Health and Medical Program of the Uniformed Services. And the 
remaining 18 percent of the population was uninsured.
  Between 1987 and 1996, the number of workers who were offered 
insurance by their employers rose from 72.4 percent to 75.4 percent; 
but, at the same time, the number of workers who accepted coverage 
actually fell from 88.3 percent to 80.1 percent. There could be several 
reasons for this declining acceptance rate. In 1988, employees in small 
firms with fewer than 200 workers paid an average of 12 percent of 
their premiums. However, by 1996, the employees' premium contributions 
had risen to 33 percent. Also, during this same period, the States were 
expanding the eligibility requirements for their Medicaid programs, and 
the real incomes of workers declined.
  The studies available to the Lewin Group in preparing their November, 
1997, report were primarily focused on an employer's decision to offer 
coverage, not on the relationship between the cost of insurance and the 
number of individuals covered by insurance. These studies also varied 
widely in their research questions and their findings. Some of the 
older studies used data from 1971 and earlier.
  The second factor identified by the GAO was the release by the Lewin 
Group, in January, 1998, of a revised estimate of the coverage loss due 
to health care premium increases. The Lewin Group now believes that 
approximately 300,000 people could lose their employer-sponsored 
coverage for every one percent increase in premiums. The new estimate 
is based on a new statistical analysis of the relationship between what 
employees pay for health insurance, and the likelihood that their 
families have access to employer-sponsored health insurance.
  The Lewin Group estimates also assume equal premium increases for all 
types of insurance products. Since the legislation that Congress is 
considering will primarily affect HMO premiums, employees faced with 
higher premiums may switch to other types of insurance rather than drop 
coverage entirely. Based on the work of the Barents Group, the GAO 
found that this change in plans by employees would further reduce the 
Lewin Group estimate to a number less than 300,000.
  In conclusion, the GAO report indicates that if health insurance 
premiums increase by one percent for only some types of insurance (for 
example, HMOs), then the coverage loss predicted by the Lewin Group 
would be less than 300,000. However, the GAO urges that this figure 
must be used cautiously. There are still many factors that were not 
included in the Lewin Group estimate, such as: changes in benefits 
offered by an insurance plan; changes in real wages; and what 
percentage of a premium increase is passed on from the employer to the 
employee.
  Mr. President, as we consider legislation to ensure that Americans 
have access to high-quality health care, we must also be concerned that 
new health plan requirements do not lead to increased numbers of the 
uninsured. The GAO report, ``Private Health Insurance: Impact of 
Premium Increases on the Number of Covered Individuals Is Uncertain,'' 
will be a valuable resource for the Congress in achieving an 
appropriate balance between these two important societal goals.

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