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Insurance Companies

One of the more surprising parts of the health care debate is that, until recently, the insurance industry actually supported the health care reform effort… sort of.  For months, the insurance industry lobbying group, America’s Health Insurance Plans (AHIP), largely kept its mouth shut– at least publicly.  Keep in mind that 15 years ago, these were the same people that helped kill Bill Clinton’s health care plan by running ads like these:

This time around, they’ve actually been running vaguely pro-reform ads like this one:

Why the Change? 

Like everybody else involved with health care, even insurance companies realize that the current system is unsustainable.  Jonathan Cohn writes in The New Republic:

But times have changed for the insurance industry. The commercial insurers who dominate make most of their money by working with large companies that cover their workers. And that business is slowly falling off, because fewer employers are willing or able to pay the premiums as health care costs skyrocket. Back in the 1990s, insurers could be ambivalent about reform, in part because they felt they had the power to control costs on their own, by turning to managed care. But they’ve done that now and, after a short respite, costs are going up again.

A government intervention–one that restrained cost increases and, no less important, compelled millions to buy private insurance–would provide these insurers with a more predictable and stable stream of business.

With costs rising so quickly, many employers and individuals can no longer afford their premiums, and the insurance companies are losing customers fast.  Now, the democrats’ plan says that insurance companies:

  • 1. have to accept everyone, regardless of preexisting conditions (guaranteed issue), and
  • 2. couldn’t charge them more than their healthier customers (community rating).

In the past insurance companies have fought these rules tooth and nail.  But the new democratic health care plan also says:

  • 3. that people without health insurance would have to buy it or face a tax penalty.

There are 45 million people without insurance in the U.S., or, looking at it like an insurance company, 45 million potential new customers.  Only some of them don’t have insurance because of pre-existing conditions– most don’t have health insurance because they simply can’t afford the premiums.  With the government kicking in hundreds of billions of dollars to help cover those people, insurance companies would be willing to accept new rules saying that they have to accept people who are actually sick.

At least publicly.  Behind the scenes they’ve been lobbying furiously to weaken those rules.  They’ve been fighting for flexible benefit design- which would let insurance companies structure their plans to attract a healthier pool of people.  They’ve been fighting for community rating rules that would allow them to charge way more for older people- since older people get sick more often, this would be one way around rules against charging sick people more.  They’ve been fighting for severe penalties for people without coverage.  And of course, they’ve been fighting hardest against the public option.

And for the most part they’ve been getting their way.  The Senate Finance Committee bill contained no public option and would allow insurance companies to charge older people five times as much as younger people.

Yet, despite all the lobbying, there were still some things in the bill that AHIP didn’t like.  So they commissioned Pricewaterhouse Coopers (PWC) to do a study of how health care reform would affect premiums, and released the results the day before the Finance Committee voted on its final bill.  For the insurance companies this was an incredibly stupid move.

The Report

The study said that certain provisions in the health reform bill would lead to skyrocketing premiums for consumers.  Apparently, AHIP assumed that would be enough to scare lawmakers into rewriting those parts of the bill.  Unfortunately for AHIP, within 24 hours bloggers had basically destroyed the credibility of the study, which had a bunch of problems.  (For example, it pretended that the subsidies the bill grants to low- and middle-income Americans didn’t exist.)  The fallout was so bad that the next day Pricewaterhouse released a statement blaming AHIP for the problems with the study, saying that basically AHIP paid them to focus on four parts that AHIP didn’t like and ignore everything else in the bill.

While the AHIP study didn’t scare lawmakers, it did make them mad.  Democrats started talking about revoking the insurance companies’ anti-trust exemption and suddenly the public option was back on the table in a big way.  Even President Obama blasted insurance companies in his weekly internet address. (You know you’ve messed up when President “Everyone will get a seat at the table” Obama is calling you out.)

Many people are saying that by releasing the deceptive report insurance companies have actually strengthened the health reform effort, giving Obama and the Democrats a clear, universally hated enemy to fight against.  An article in The American Prospect quotes Rep. Anthony Weiner, a Democrat from New York and a strong advocate of a single-payer system:

“In a strange way, and look, obviously they didn’t mean this, the health-insurance lobby today fired the most important salvo in weeks for the public option, because they have said, as clear as day, left to their own devices, according to their own number-crunchers, they’re going to raise rates 111 percent.”

What now?

Honestly, I think the insurance industry has lost its collective mind.  Two weeks ago AHIP had its annual State Issues conference.  On October 21, AHIP put out a press release saying,

AHIP President and CEO Karen Ignagni today affirmed health plans’ strong support for comprehensive, bipartisan health care reform that covers all Americans, improves quality, and makes care more affordable.

On the SAME DAY at the SAME CONFERENCE, one of AHIP’s top lobbyists, Steve Champlin was quoted saying:

“There is absolutely no interest, no reason Republicans should ever vote for this thing. They have gone from a party that got killed 11 months ago to a party that is rising today. And they are rising up on the turmoil of health care.  So when they vote for a health care reform bill, whatever it is, they are giving comfort to the enemy who is down.”

We’re not sure exactly what to make of that.  But with the insurance industry starting to air deceptive ads targeting senior citizens, it looks like they’re switching into battle mode.  And that actually might help get health reform passed.

[PS: Another interesting message coming out of the AHIP conference.  This time in verse:

More info on what that was all about here.]

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