Blue Cross, Blue Shield Healthcare Company Warned in 2009 that White House was Using Bogus Gruber Information

By Robert Wenzel

Jonathan Gruber, who has said on many occasions, as evidenced by various video recordings, that the American public is stupid and must be lied to, specifically about Obamacare, should have come under particular suspicion years ago, when Obamacare was in the development stage.

The White House relied on his fancy footwork to support parts of Obamacare proclamations that just  weren't true.

WellPoint Inc.,the largest for-profit managed health care company in the Blue Cross and Blue Shield Association, specifically called out, in 2009, Gruber misinformation--and there is little doubt that the White House was not aware of WellPoint's warnings.

On October  22, 2009, WellPoint put out a negative report on Obamacare discussing some of the ramifications of program.

The White House responded on its blog the following day.

And although the White House is now attempting to distance itself from Gruber,  the White House referenced a Gruber research paper in its response to WellPoint. (Curiously, the page referenced by the White House is no longer available.)

That Gruber was referenced at this early date by the White House should not come as a surprise and creates even more suspicion about the alleged distance between Gruber and the White House.

Indeed, Ezekiel Emanuel, then- a"special adviser on health care reform to the White House" and brother of then-White House chief of staff Rham Emanuel, in his book, Reinventing American Health Care: How the Affordable Care Act will Improve our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System, mentions Gruber and  writes

[T]he Department of Health and Human Services contracted with Jonathan Gruber an economist at MIT to predict the CBO score. Gruber was picked largely because he had developed an economic model of health care system that the CBO borrowed and refined to create its own model.

But, in a rebuttal, here is how WellPoint responded to the White House blog post and specifically to Gruber's "analysis" (my highlights):

White House Gruber Reference

Perhaps most disturbing is an assertion by the White House blog that WellPoint reaches almost exactly the opposite conclusion to the CBO. The blog provides a direct link to a paper by Jonathan Gruber of MIT, not the CBO, nor does the blog provide a link to the CBO analysis. While the CBO has not released a detailed analysis of the impacts of all of the health reform proposals on premiums, an initial analysis it has produced, an impact analysis of the Chairman’s Mark for the Senate Finance Proposal, the America’s Health Future Act, has focused almost entirely on the impact of subsidies on premiums rather than the impact of health reform as a whole on premiums. The CBO letter to Chairman Baucus opens by stating,

[T]his letter responds to your questions about the subsidies offered through insurance exchanges and enrollees’ payments for that coverage under the specifications for the Chairman’s mark for proposed health care legislation that were provided by the staff of the Senate Finance Committee on September 15, 2009. It also discusses the factors that affect a comparison of those figures to the amounts that individuals and families would pay, on average, for employment-based coverage or individually purchased policies under current law.

 Additionally, because the White House chose to reference the Gruber white paper on reform, we believe it is important to note that reform will result in individual market premiums increasing, not decreasing, as stated in the Gruber paper. The Gruber paper refers to a CBO paper stating that a typical non-group single-coverage plan is projected to cost $6,000 in 2016.31 However, Gruber fails to mention that the same CBO report specifically excludes one very important factor:  

Premiums in the new insurance exchanges would tend to be higher than the average premiums in the current-law individual market—again with other factors held equal—because the new policies would have to cover preexisting medical conditions and could not deny coverage to people with high expected costs for health care. (CBO has not analyzed the magnitude of that effect).

Thus, the Gruber paper excludes a factor (known as guaranteed issue) that WellPoint
estimates would add between 20 percent and 80 percent to the cost of premiums under
reform,and which the CBO acknowledges would result in increased costs relative to the
existing market with all else being constant.

The Gruber paper assumes there is a 5:1 ratio between premiums for 25 and 60 year olds
in the existing non-group market.35 Gruber states: 

The CBO reports that a typical non-group single plan is projected to cost $6,000 in 2016. For the family plan for a family of four, I assume the premium is 2.7 times the single premium, as with group insurance. I assume that there is a 5:1 ratio between premiums for 25 and 60 year olds in the existing non-group market.The CBO also reports that a silver plan (with an actuarial value of 0.70) wouldcost on average $5,000 in 2016. The Bronze plan has an AV of 0.65, so the price is 93 percent as high. I assume that the premium for a 25 year old is half that amount and for a 60 year old is twice that amount for a total age band of 4:1. For the catastrophic premium, I assume and actuarial value of 0.5. For a family plan, Iassume that the premium is 2.7 times the single premium. 

In reality, the actual ratio varies by state and insurer and averages in excess of 6:1 for
males and 4:1 for females.37 Ultimately, the Senate Finance proposal requires elimination of gender rating (in the many states that currently allow it) and compression of agevariation.38 Thus, making an assumption solely around age results in an oversimplified analysis.

The Gruber paper also assumes in each case that family rates will be 2.7 times the single
rate. In fact, there is significant variation in this ratio. And, in some cases, family rates
are developed by summing the applicable individual rates for each member of the
family. In these cases, the resulting ratio can be dramatically higher or lower than the
simplistic assumption applied in the paper. Again, this variation will cause actual rates to
be significantly higher in some cases and lower in others than those shown in the paper.
Thus, this assumption does not reflect reality.

The Gruber paper focuses solely on premiums net of subsidies as though everyone would
be eligible for subsidies.40 In reality, under the proposals a large portion of the American population would not be eligible for subsidies.41 While there will be 282 million non-elderly Americans in 2019, 185 million of them will be insured through their employer or enrolled in non-exchange non-group insurance and therefore ineligible to receive subsidies. The CBO estimates that 5 million of the 23 million individuals eligible for the exchange will be unsubsidized, leaving 18 million people eligible for subsidies throughthe exchange. A better representation would be to display post-reform premiums bothwith and without subsidies to give a more comprehensive picture. The WellPoint
analyses show both the impact to costs before and after the availability of taxpayer
assistance in the form of premium subsidies.3

Additionally, while the Gruber paper also identifies a specific price for the “young
invincible” policy,the details for the policy are not identified in the legislation.This
option is also only available to those 25 and under, and others will be required to buy
richer benefits.

In sum, in the underwritten individual market today, premiums are often available for
under $100 per month, depending on the characteristics of the individual. It is simply not
reasonable that legislation with the following characteristics will widely result in reduced
premiums: (1) requires insurers to offer coverage to individuals with pre-existing
conditions; (2) allows individuals to wait to get coverage until services are needed and
just pay a small penalty; (3) requires richer benefits; (4) eliminates health status
discounts; (5) reduces age discounts; (6) eliminates gender discounts; and (7) applies new taxes to the market. The WellPoint analyses are far more detailed, complete, and use real market data.

Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics