Why the insurers will win in Obama’s health reform
By: Timothy P. Carney
Examiner Columnist
April 29, 2009
President Barack Obama and Sen. Ted Kennedy look likely to give the health insurance industry exactly what it wants on health care reform. This would be an ironic outcome, considering how activists on the Left have demonized the insurers, and how crucial health care reform is to liberals who care about policy.
While Obama and congressional Democrats will claim the insurers’ victory as a win for the forces of equality and progress, the more hard-core Left — the progressives who formed much of Obama’s base — will swallow this as a bitter pill or even a deal with the devil.
The industry will win because of its influence, but also because its proposed policies of bigger government with “pro-business” incentives are a combination that congressional leaders always favor.
Leading the insurance industry’s campaign this year has been the trade group America’s Health Insurance Plans, which has spent $4.3 million on lobbying in the past six months.
AHIP’s plan boils down to a package of mandates and subsidies. To begin with, Congress would place two mandates on insurance companies: First, insurers must thoroughly cover everyone who wants, and will pay for, insurance, regardless of health, age or pre-existing conditions (this is known as “guarantee issue”). Second, insurers would be required to charge customers the same regardless of health (called “community rating”).
For their part, insurance companies want a third mandate, called the individual mandate, under which the federal government forces people to buy and maintain health insurance. The policy rationale for the individual mandate is to guarantee that the pool of insured people includes the young as well as the old, so that risk is spread. The benefit for insurers is obvious: You must buy their product.
The next request from the insurers is also unsurprising — Washington should subsidize people’s insurance. It’s unclear, now, just who would be subsidized. Maybe younger people, who would face the largest burden from the mandates, should be subsidized. Maybe the poor and middle class, on whom the individual mandate would impose a difficult new cost, should get assistance.
Insurers and the Obama administration also agree that Washington should work to lower health care expenses. How much money is wasted on name-brand drugs instead of generics? How much do doctors and hospitals overcharge or conduct unnecessary tests or procedures? How much do medical equipment makers or sellers hawk extravagant or unneeded wares that eventually end up in health insurance premiums?
One form these cost controls could take is called “comparative effectiveness research” (statistical analysis of the costs and benefits of certain treatments and drugs) whose use in the U.K. has been criticized as “rationing.”
But insurance companies fear the proposal that government should be an insurer. The liberal desire — a single-payer system with government, in effect, the only insurer for all Americans — is not seriously on the table for now, in part because insurers, drug makers and other health care industries oppose it.
Instead, Obama has called for the “public option.” He wants the federal government to compete with private insurance companies, offering individuals the same insurance plan members of Congress have. Insurers and conservatives oppose this plan as a Trojan horse for government-run health care. Private insurance companies don’t think they can compete with government’s nearly unlimited resources.
Obama and the insurers also disagree on the individual mandate, potentially a regressive tax imposing cost on everyone, regardless of ability to pay.
The policy debate is nascent in Congress, but already there are important cracks in Democratic support for the public option. The Washington Post editorial page, an important voice within the Democratic congressional caucus, wrote Monday, “It is difficult to imagine a truly level playing field that would simultaneously produce benefits from a government-run system.”
But there is room for compromise. The insurers, obviously, wouldn’t mind if the government insures the most costly patients — those with chronic illness, for instance. If Obama signed a measure including a public option that was expansive but expensive — just what a very sick person needs — private insurers could lower their premiums because their pools would be healthier.
The insurers’ heavy lobbying and generous campaign contributions add to their influence. It also helps that their call for more government involvement in the industry dovetails with Democrats’ goal. In the end, Obama will increase government, and the affected industry will rejoice, and profit.
