Healthcare insurers get upper hand
Obama's overhaul fight is being won by the industry, experts say. The
end result may be a financial 'bonanza.'
By Tom Hamburger and Kim Geiger
LASHED BY liberals and threatened with more government regulation, the
insurance industry nevertheless rallied its lobbying and grass-roots
resources so successfully in the early stages of the healthcare
overhaul deliberations that it is poised to reap a financial windfall.
The half-dozen leading overhaul proposals circulating in Congress
would require all citizens to have health insurance, which would
guarantee insurers tens of millions of new customers -- many of whom
would get government subsidies to help pay the companies' premiums.
"It's a bonanza," said Robert Laszewski, a health insurance executive
for 20 years who now tracks reform legislation as president of the
consulting firm Health Policy and Strategy Associates Inc.
Some insurance company leaders continue to profess concern about the
unpredictable course of President Obama's massive healthcare
initiative, and they vigorously oppose elements of his agenda. But
Laszewski said the industry's reaction to early negotiations boiled
down to a single word: "Hallelujah!"
The insurers' success so far can be explained in part by their
lobbying efforts in the nation's capital and the districts of key
The bills vary in the degree to which they would empower government to
be a competitor and a regulator of private insurance. But analysts
said that based on the way things stand now, insurers would come out
"The insurers are going to do quite well," said Linda Blumberg, a
health policy analyst at the nonpartisan Urban Institute, a Washington
think tank. "They are going to have this very stable pool, they're
going to have people getting subsidies to help them buy coverage and .
. . they will be paid the full c osts of the benefits that they
provide -- plus their administrative costs."
One of the Democratic proposals that most concerns insurers is the
creation of a "public option" insurance plan. The industry launched a
campaign on Capitol Hill against it, grounded in a study published by
the Lewin Group, a health policy consulting firm that is owned by
UnitedHealth Group. The lobbyists contended that a government-run
plan, which would have favorable tax and regulatory treatment, would
undermine private insurers.
Opposition increased this month when boisterous critics mobilized at
town hall meetings held by members of Congress home for the August
The attacks, supplemented by conservative critics on talk radio and
other forums, drew national attention.
Leading insurers, including UnitedHealth, urged their employees around
the country to speak out. Company "advocacy hot line" operations and
sample letters and statements were made available to an army of
insurance industry employees in nearly every congressional district.
Some insurers supplemented the effort with local advertising, often
designed to put pressure on specific members of Congress. Late in the
spring, Blue Cross Blue Shield of North Carolina -- the home state of
several conservative Blue Dog Democrats -- prepared ads attacking the
Leading Democrats have fought back, with House Speaker Nancy Pelosi
(D-San Francisco) last month calling the industry "immoral" for its
past treatment of customers and suggesting insurers were "th e
villains" in the healthcare debate.
Still, recent support for the public option has declined, and the
stock prices of health insurance firms have been rising.
Undermining support for the public option wasn't the only gain scored
by insurance lobbyists.
In May, the Senate Finance Committee discussed requiring that insurers
reimburse at least 76% of policyholders' medical costs under their
most affordable plans. Now the committee is considering setting that
rate as low as 65%, meaning insurers would be required to cover just
about two-thirds of patients' healthcare bills. According to a
committee aide, the change was being considered so that companies
could hold down premiums for the policies.
Most group health plans cover 80% to 90% or more of a policyholder's
medical bills, according to a report by the Congressional Research
Service. Industry officials urged that the government set the floor
lower so insurers could provide flexible, more affordable plans.
"It is vital that individuals, families and small-business owners have
the flexibility to choose an affordable coverage option that best
meets their needs," said Robert Zirkelbach, spokesman for America's
Health Insurance Plans, the industry's Washington-based lobbying shop.
Consumer advocates argue that a lower government minimum might quickly
become the industry standard, placing a greater financial burden on
patients and their families.
"These are a bad deal for consumers," said J. Robert Hunter, a former
Texas insurance commissioner=2 0who works with the Consumer Federation
Meanwhile, companies would probably see a benefit by providing less
insurance "per premium dollar," Hunter said.
"It would be quite a windfall," said Wendell Potter, a former
executive at Cigna insurance company who has become an industry
Consumer and labor advocates acknowledged the industry's lobbying success.
In the first half of 2009, the health service and HMO sector spent
nearly $35 million lobbying Congress, the White House and federal
healthcare offices, according to data from the Center for Responsive
With more than 900 lobbyists, that sector -- whose top spenders are
insurance giants UnitedHealth, Blue Cross Blue Shield and Aetna -- was
poised to spend more than in 2008, a record lobbying year.
UnitedHealth spent the most, $2.5 million in the first half of 2009,
and hired some of Washington's most prominent political players,
including Tom Daschle, the former Senate majority leader who served as
an informal health policy advisor to Obama.
"They have beaten us six ways to Sunday," said Gerald Shea of the
AFL-CIO. "Any time we want to make a small change to provide cost
relief, they find a way to make it more profitable."
Copyright © 2009