Naked Capitalism blog: Quelle Surprise! Health Insurers Pretended to Play Nice, Lobbied Against Reform

Quelle Surprise! Health Insurers Pretended to Play Nice, Lobbied Against Reform

by Yves Smith, Naked Capitalism, January 13, 2009

The headline above would normally be seen as “dog bites man” save for the fact that during the health reform debate, the insurers went to considerable lengths to profess they really, really had changed their ways and were now going to be good corporate citizens.

But it was pretty clear that this change of heart was just a charade. After all, if Obama was going to give the industry the store, they had to look like nice guys. You don’t give massive subsidies to people who are obviously predatory, unless they are from the financial services industry and thus can credibly threaten to destroy the economy. And from the insurance industry’s standpoint, what’s not to like about the new program? Tens of millions of formerly uninsured people will be required to buy policies from them, plus the percent of premiums they are mandated to pay out in benefits is considerably less than what they spend now (meaning the legislation in no way threatens their margins; in fact, it legitimates them and would even permit them to enlarge them). And as we will discuss soon, some of the advantages claimed for the bill are hollow.

We were very leery of the industry’s charm offensive. As we wrote last August:

My bullshit meter went into high alert earlier this week with this New York Times story, “For Health Insurers’ Lobbyist, Good Will Is Tested,” which was clearly a PR plant. It featured Karen Ignagni, a $1.6 million-a-year earning lobbyist to the health insurance industry as a heroine (I started getting nauseaous as soon as I saw the deliberately low-key picture of her in her office). And why should we see a representative of one of the biggest forces undermining democracy in America, the usually-successful efforts of well-funded industry groups to steam-roll legislative process, as a good guy, or in this case, gal? Because she supposedly talked a mean and obstructionist industry into playing nice.

This NYT article thus manages to be a two for one, trying to re-image both the health insurance industry and lobbyists. Consulting my Divine Comedy, I find lobbyists are relegated to the eight circle of hell no matter how you cut and slice it, as either flatterers (second bolgia) or false advisors (bolgia eight) or falsifiers (bolgia ten, along with alchemists and perjurers). This puts them on the same general level as corrupt politicians (bolgia 5), although one could make a case they belong in the ninth circle, traitors.

To the Times’ puff piece:

For the insurance industry, long an opponent of health care reform, it was a striking change: with a new administration coming to Washington, insurers agreed to abandon some of their most controversial practices, like denying coverage to applicants with pre-existing medical conditions.

The truly offensive bit of the piece was the Grey Lady running full bore with the line that they were being unfairly castigated, they really had turned a new leaf, and those people who were Calling Them Bad Names were risking breaking up Ms. $1.6 million woman’s fragile coalition:

For a while, it seemed to be working — until recently, when the insurance industry re-emerged as Washington’s favorite target. “Villains,” Nancy Pelosi, the House speaker, called health insurers. And Mr. Obama derided the industry for pocketing “windfall profits.” 

Taken aback, Ms. Ignagni, the 55-year-old chief executive of the trade group America’s Health Insurance Plans, wondered on Tuesday why insurers were being singled out when, in her view, they had accepted that change was necessary.

“Attacking our community will not help get anyone covered,” she said.

The last statement was very revealing. It’s tantamount to “We still hold the whip hand.” And it appears they do.

Back to today’s update. Notice that the big concession that the industry supposedly made was its stand on pre-existing conditions. But the bill has a giant loophole: insurers can continue to cancel policies in the case of “fraud or intentional misrepresentation” as they do now. Readers have no doubt hear of or read about how low the permitted bar is now for insurers to rescind policies. And when are insurers most likely to look to find grounds not to pay for treatment? When you most need it, of course, when you have a serious, expensive ailment.

National Nurses United, a 150,000 member organization, opposes the bill. Some of its reasons:

As Jean Ross, NNU co-president noted, “the bill seems more likely to be eroded, not improved, in future years due to the unchecked influence of the healthcare industry lobbyists and the lessons of this year in which all the compromises have been made to the right.”….

Individual mandate was the top priority of the insurance industry, which also succeeded in fending off meaningful restraints of its predatory pricing practices. The likely outcome is that far too many people will still face healthcare insecurity or medical bankruptcy due to ever rising out-of-pocket costs, or continue to skip needed medical care because of the high prices.

Indeed, discouraging provision of care as the preferred way to control costs, rather than rein in the pricing practices of the insurance and drug giants, is a central tenet of the insurance industry and conservative policy wonks.

So the story thus far is that Team Obama was handing the insurance industry everything it wanted on a silver platter (recall the shameful incident in which the public option was dropped despite Congressional support; it was a mere trading chip, not something Obama was ever serious about). The industry was supposed to play nice.

Well it didn’t even hold up that part of the bargain. Admittedly, Congress started calling the insurers bad names. Please. The dealings with Team Obama had been so cozy that a little roughing up would have good PR value for both sides. It would create the appearance that the powers that be had not caved in to the insurers.

And a general rule: in a good negotiation, both sides come out feeling a little bruised and unhappy. No one gets everything they want. But the insurers weren’t about to adhere to the new posture they had pretended to adopt to win over the public. As soon as they started encountering opposition, they cranked up the attack ads. But rather than fund them directly, they channeled money through the Chamber of Commerce. From the National Journal:

Just as dealings with the Obama administration and congressional Democrats soured last summer, six of the nation’s biggest health insurers began quietly pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress…

The fundraising started last September and continued through December using AHIP as a conduit to avoid a repeat of the political flak that hit the insurance industry after it famously ran its multimillion-dollar “Harry and Louise” ads to help kill health care reforms during the Clinton administration…

Publicly, the group has stressed repeatedly that it supports health care reform legislation…
Since last summer, the chamber has poured tens of millions of dollars into advertising by the two business coalitions that it helped assemble: the Campaign for Responsible Health Reform and Employers for a Healthy Economy.

In late October, the chamber helped cobble together a larger coalition, Employers for a Healthy Economy, which became the key advertising vehicle for attacking provisions in the House and Senate bills being developed…The ads sharply criticized the high costs of the separate bills, especially the House version. The commercials warned the legislation would raise taxes for Americans and hurt the economy as it tries to recover from the recession. And some chamber-financed commercials attacked setting up a government run plan to compete with private insurers — a special sore point for the insurance industry — which is part of the House measure.

The U.S. Chamber has spent approximately $70 million to $100 million on the advertising effort….Sources say that the chamber-backed ads will likely continue as the two bills are combined in coming weeks.

Yet if any bill passes, the industry will show greater earnings, which will allow them to spend even more on lobbying and advertising, which will enable them to secure even more favorable legislation.

Link:  http://www.nakedcapitalism.com/2010/01/quelle-surprise-health-insurers-pretended-to-play-nice-lobbied-against-reform.html