By Evan Falchuk

The strangely out-of-touch comments by proponents of reform legislation continue.

Yesterday, Christina Romer, the head of the President’s Council of Economic Advisers was asked about the proposed excise tax on so-called “Cadillac” health plans.  Romer said:

Part of the idea of how that is going to work is precisely because it does empower consumers. It empowers each of us to have an employer-sponsored plan to call our HR office and say, ‘Would you negotiate harder? Would you think about (whether this) is the most efficient plan out there, because I don’t want my plan paying an excise tax.’ So I think that’s something that is very much empowering consumers.

It’s a bizarre statement.  Roemer has impressive academic credentials, but this kind of statement betrays a profound ignorance of how employers actually buy health benefits.  She’s not the only one with such strange beliefs.

So, let me make it simple.

Companies across America use skilled and experienced benefits professionals to design and implement their health plans.  The bigger the employer the better they are at this.  In fact, big employers are such smart negotiators that they manage to get the services of the insurance companies without paying them a dime for health insurance.  It’s true: they just use the insurance companies to mechanically pay for the cost of their employees’ care, which comes out of the pocket of the employer.

Now, the smaller an employer is, the more difficult it is.  If you’re a company with 20 employees, your problem isn’t whether you are any good at negotiating.  It’s that you probably live in a state where one or two insurance companies dominate the market.  Your choices are limited, and because you’re too small to self-insure, you need to buy insurance from one of them.

But it’s worse than that.  State laws make it so that even if you were to try to “negotiate harder” (whatever that means), there isn’t much the insurance company is allowed to do.

So what is Professor Romer talking about?  Frankly, I have no idea.  So many reform proponents in Washington have never run a business or designed a benefit plan, so I’m becoming less and less surprised when they come to strange conclusions about these things.  But what doesn’t help is that they seem to prefer to spend so much time behind closed doors in Washington, or on TV, and so little time out talking to people actually in this business to see what works and what doesn’t.

This is hubris.  And it bodes very ill for the likelihood that plans coming out of Washington are going to make things better and not worse.