(image found at realitycheck.org)
This post has been carried forward from early this morning.
See if you think these two assertions mean the same thing:
- Small businesses pay up to 18 percent more per worker than large firms for the same health insurance policy.
- …. small businesses pay up to 18 percent more per worker to provide health insurance for their employees.
Of course they don’t mean the same thing. But to the Associated Press’s Tom Raum, they apparently do.
The first statement comes from the Executive Summary of a study produced by the President’s Council of Economic Advisers (CEA) called “The Economic Effects of Health Care Reform on Small Businesses and Their Employees” that the administration is using to promote passage of its health care plan. Based on dated information in the detailed CEA studay, the statement appears to be true, though with overly clever “up to” wording.
The second statement unfortunately exemplifies how the AP’s Raum wrote up the CEA result in his story. This means that his write-up has several items that are demonstrably false.
Here are the story’s first few paragraphs, with incorrect assertions noted in red:
If you go to the detailed CEA study (PDF here), you’ll find these two sentences appearing one after the other on Page 4 (page 7 of the PDF), showing that it also didn’t have all its ducks in a row:
Most obviously, small businesses pay substantially more to provide insurance for their workers. On average, small businesses pay up to 18 percent more than large firms for the same health insurance policy.(6)
The first sentence is not true, but the second may be, based on this somewhat fuzzy chart that can be found at the 2006 study of 2002 data (you read that right) referenced at the Footnote (6) noted in the excerpt:
I have added the boxed calculations on the left to make it very clear how wrong Raum is.
What these calculations show is that, in 2002, what employers were paying for employee coverage at small companies wasn’t very different from what was being paid at large companies, or at all companies taken collectively. Tiny firms were paying 9% more than the average of all firms, while those with 10-24 employees were paying 3% more. Those with 25-99 employees were actually paying less. For family-of-four coverage, rates were virtually equal across the board.
Again, Raum wrote that “small business pay far more per employee for health insurance” and that “small businesses pay up to 18 percent more to provide health insurance for their employees.” Those statements are obviously and indisputably incorrect.
The key difference between what Raum wrote and the 2002 claim is, of course, the addition of the verbiage “for the same insurance policy.” The obvious trouble with that statement is that small businesses don’t buy “the same insurance policies.”
The 2002 study’s authors compared plans in each employer size category in the chart above, and found, not surprisingly, that small-company plans were slightly less generous. They then (I’ll assume validly) used the actuarial quality comparisons and looked at other plan features (co-pays, deductibles, out-of-pockets, and type of plan) and applied regression analysis to come up with what is really a “what if” chart:
The “up to 18%” claim only applies to the smallest of employers, and would only matter if they had coverage exactly the same as that found at large firms. For the next three employer categories the “same insurance policy” costs would be roughly 10% or less.
But the key terms are “what if” and “would be.” The fact remains that small businesses, to remain competitive, appeared in 2002 to be tweaking their coverages to keep their health insurance costs in line — perhaps to avoid overly expensive items, to avoid items they knew their employees didn’t need, or a combination of both. Last time I checked, there’s not a darn thing wrong with that. If small firms make coverage mistakes and under-cover, they lose employees who find greener pastures and/or have a hard time recruiting new ones. If they over-cover, they become uncompetitive.
What ObamaCare would more than likely do is force small employers to adopt the very plan features they have avoided. Mandating costly provisions may not increase employer premiums, if the government ends up controlling a one-size-fits-all market. But in the meantime, premium differentials would inevitably develop, and small-employer premiums would more than likely increase significantly, as the regression results show. As I understand it, ObamaCare supposedly promises small businesses tax credits designed to make up the differences such as these that would almost of necessity arise; but it’s hard to believe they would operate evenly, meaning that net health care costs at otherwise identical firms might be very different.
More important, because of the additional layers of mandated coverage, costs incurred in the health care system by employees at smaller firms would also necessarily go up, perhaps by as much as the 6%-18% noted above in the regression analysis, as “what if” becomes an expensive reality.
So what the administration is touting as the solution to a non-existent “problem” — non-existent because, at least as of 2002, small employers weren’t actually paying out much more for insurance premiums than were large firms — would actually create new problems of differential treatment and escalating systemwide costs.
If they’re capable of it, the CEA, the White House, and Obama should be ashamed of themselves for attempting this gambit.
But as long as ignorant reporters like the AP’s Tom Raum take shortcuts in their reporting to create clearly false impressions about what is really happening — without even digging deep enough to learn that proponents are relying on 7 year-old data, a lifetime in a fast-changing industry — the administration’s claim that state-run care will help save small businesses that are supposedly failing en masse largely because of their health-care burden might actually catch on with the public. It obviously shouldn’t, because it’s simply not true.
Cross-posted at NewsBusters.org.