AHA: CBO Report Inaccurately Assessed Commercial Insurance Premium Drivers

The American Hospital Association (AHA) found that the Congressional Budget Office (CBO) did not accurately portray health insurance premium drivers, specifically that the office neglected to communicate the role of commercial insurance market power and the costs that hospitals shoulder, according to a post by the organization.

“At best, this paper can be described as incomplete; at worst, it contains numerous omissions, inaccuracies and misleading assertions,” the post stated.

“CBO ignores a wide body of research on the factors driving premium costs, makes unfounded assumptions about insurer and employer behavior and declines to consider the very real and potentially dire consequences that these approaches could have on patients’ access to care, as well as quality and innovation.”

The provider organization argued that provider prices are not responsible for health insurance premium increases. The post stated that this is an underlying assumption in the CBO report that is not proven. Hospital price growth has fallen below health insurance premium growth in the past decade, the organization has pointed out in this post and previous publications.

CBO also inadequately addressed insurance companies’ market power. The health insurance industry’s consolidation grew from 2014 to 2020, with nearly 75 percent of metropolitan statistical areas being highly concentrated, according to an American Medical Association report.

“The implications of insurers’ vast market power extends more broadly than the premiums they charge employers and employees,” AHA stated. “Their market power as a payer allows them to drive up costs for providers through administrative requirements for which they sell ancillary product and services solutions.”

Failing to acknowledge the power that health insurers have over healthcare costs and drives of costs can impact policymakers’ ability to address costs.

In addition to impressing the dangers of health insurance consolidation, AHA noted the benefits of hospital consolidation. Health systems tend to point to research showing that hospital mergers can save billions of dollars in healthcare spending.

Hospital input costs and structural underpayment can also contribute to hospital spending, AHA noted. Labor costs and prescription drug costs are increasing. Moreover, public and private health insurance programs do not necessarily pay hospitals the negotiated prices resulting in underpayment, AHA stated.

Not only did the CBO report fail to include these factors, but the policy recommendations could negatively impact patients by constricting hospitals’ power to deliver quality care and innovation. CBO acknowledged that its policy recommendations’ impact on consumers were unknown.

“Put simply, reducing provider reimbursement would compound the many financial stresses already faced by our nation’s hospitals and health systems,” the AHA experts concluded.

“Policies like those CBO puts forth would undermine hospitals’ ability to provide basic health care services, and even more hospitals could be expected to close, leaving more patients stranded.”