by John M. Curtis
(310) 204-8700

Copyright Oct. 12, 2009
All Rights Reserved.

               Mounting frontal assault on the President Barack Obama’s health care bill, the insurance industry warned about driving up premiums for those with private or employee-based health coverage.  Insurance industry lobbyists, with their minions in Congress, oppose national health care, fearing that a qualified government plan would take money from the insurance industry.  Warning about rising premiums, the insurance industry’s top lobbyist Karen Ignagni, president of America’s Health Insurance Plans, threatened to launch attack ads, the same approach that torpedoed former President Bill Clinton and First Lady Hillary Rodham Clinton’s plan in 1993.  Barack’s health national reform hasn’t taken into consideration the potential hit to insurance industry’s earnings.  Given the industry’s relationship to Wall Street, the White House should have considered potential unrecoverable losses.

            White House officials, and those in Congress more closely tied to health reform, should try to reassure the insurance lobby that they won’t let the health insurance industry hemorrhage without some type of compensation.  If restructuring health care takes profits away from the insurance industry, then the White House and Congress need to address the inequity.  It’s not enough to blast the insurance industry for piracy when other profit-driven industries receive bailouts.  If the government sees fit to bailout the banking industry or commercial lines brokers like AIG, they can do the same from the health insurance industry.  While recognizing the necessity of insurance reform, no one industry should pay a heavier price to achieve the health care overhaul.  On Tuesday Oct. 13, the Senate Finance Committee is scheduled to vote on Sen. Max Baucus’ (D-Mt.) $829 billion, 10-year heath care plan.   

             Baucus’ plan, which includes much of what President Barack Obma seeks in health care legislation, attempts to deal with runaway health care costs and growing numbers without insurance.  Most Republicans oppose a so-called “public option,” where the government, like Medicare, pays directly to reimburse providers.  Baucus’ plan falls short of public financing, instead funding nonprofit insurance coops to pay health care benefits.  “We’ve got ourselves a real health care shooting war now,” said Robert Leszwski, a former health insurance executive turned consultant.  Leszewski worries that the train may leave the station before the health insurance industry accepts expected changes to health care reform.  “The industry has come to the conclusion that the way things are going in Congress, we’ll have a . . . formula that will be disastrous for their business, so they can’t stand on the sidelines any longer.”

            Insurance industry executives worry that proposed changes banning the industry from excluding “preexisting conditions” or altogether blackballing patients with certain costly diagnoses will erode industry profits.  “The misleading and harmful claims made by the profit-driven insurance companies are politicking for corporate gain at its worst,” said Sen. Jay Rockefeller (D-W.Va.), rejecting industry objections to health reform   Whether admitted to or not, Rockefeller must acknowledge that if Congress dictates terms-and-conditions to the insurance industry, they won’t preserve profit-margins.  Many industry practices are designed to reduce risk to insurers.  Premiums, exclusions, ratings, deductibles, co-payments and waiting periods are all designed to lessen industry exposure to taking on health insurance contracts.  Governmnet restrictions or limitations on any or all of those parameters reduce profits.

            Industry lobbyists worry that Congress will exclude insurers from jacking-up premiums, increases reduce insurers’ corporate liability.   An insurance industry-commissioned study by PricewaterhouseCoopers warns about rising heath care costs stemming from health care reform.  Given changes to existing insurance laws, Congressionally-approved changes would affect the industry’s bottom line.  What the industry really fears are Congressionally mandated restriction on increasing premiums on existing insurance contracts beyond expected cost-of-living adjustments.  PricewaterhouseCoopers estimates that family premiums could go up by $1,700 or individuals by $600 by 2013.  Industry spokeswoman Ignagni warns that without nearly 100% participation in the new health plan, the plan won’t generate enough premiums to pay for admittedly hefty benefits.

            Whether or not the Finance Committee passes the Baucus plan tomorrow, the Congress will have to address potential devastating losses to insurance industry profits.  Allowing the insurance industry to market government plans or providing insurers some type of bailout for expected losses, the Congress has more work to do to satisfy the insurance industry.  Given that Wall Street calls the shots, the Congress can’t expect one industry to bear the brunt of health care reform.  Whether popular or not, the insurance industry must have a way of assuring profits or face a meltdown in share prices.  There’s no point to passing any health care reform if it harms one industry at the expense of the overall economy.  Whether or not PricewaterhouseCoopers exaggerated problems with health care reform, the Congress must do what’s necessary to reassure the insurance industry.

  John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.