Felicia Muftic – For-profit insurance companies, the fly in the health care reform ointment
August 9, 2009
The Democrats have altered their strategy. For the past four months they have focused on health care reform with a dual intent of lowering costs of delivery and changing health insurance methodology. They appealed to bipartisanship, and tried to get 100 percent of the health providers on board.
They have not dropped cost cutting goals or a public option plan, but they are now aiming their canons at the for-profit health insurance industry. House Speaker Nancy Pelosi calls the health insurers “the villains.” MSNBC’s Dylan Ratigan (not known for liberal rabble rousing) tags them “vampire capitalists.” I would call them “anti consumer,” at least.
Why have Obama and the Democrats shifted tactics? Does the health insurance industry deserve this verbal abuse?
Almost all sides in the health care reform debate agree that much can be done to lower the costs of delivery, but any savings that can been squeezed out of the entire health delivery system fails to cover the cost of covering 40 million uninsured. What is essential to trim fat from the health care system is changing the way health insurance does its business.
Bipartisanship died with the stimulus debate when the congressional Republicans decided it was good strategy to torpedo anything Obama proposed. Health care reform is getting the same treatment.
Republicans have presented no comprehensive alternative and many were ideologically opposed to the Democrats’ plan, anyway. The American Medical Association, many non-profit health care providers, and pharmaceutical companies came over to the president’s side, leaving the Republicans with one powerful ally: the for-profit insurers.
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The for-profit insurers decided early in the game to oppose any competition from a public health option that might force them to reduce “administrative costs”: executive pay, sales commissions, lobbying and advertising budgets, or excessive profits. The for-profit insurers declared war on Obama’s plans. Belatedly, Obama has declared war on them.
Why is Obama taking on the insurers? The for-profit insurers launched a $1.4 million-per-day, 350 lobbyists strong campaign to stop a public health option in the halls of Congress. They also fed half a million dollars to the Blue Dog Democrats Political Action Committee fund. Another key target: Sen. Max Baucus (D-Montana), who received generous campaign donations from the for-profit insurers and has been the No. 1 log jammer for the president’s proposal for a public option.
Another killer was the insurers launching ads that were blatantly deceptive and fearmongering. For a while, the Democrats failed to rebut these, hoping to keep the insurers at the bargaining table, and the polls began to plummet. It was time to stop making nice.
Why then are the private insurers so determined to stop a plan that would provide consumers with a choice of theirs or a government run option? They have it good now. In 2007, their profits were $13 billion. They anticipate being paid $170 billion over the next 10 years for administering Medicare Advantage. Obama would like to use that money instead to pay for expanding access that is affordable to the currently uninsured, while pledging not to reduce benefits to Medicare recipients.
Our for-profit insurance system is inherently anti-consumer. Insurers have a built-in incentive to get out of paying your claim or covering bad risks. They want to show their stockholders in their annual reports how much their “medical loss ratio” (i.e the amount the pay out in claims vs. the premiums they collect) contributed to a healthy bottom line and covered their “administrative costs” and generated a generous profit. What you would consider a claim paid, they consider a “loss” on their balance sheets.
They want to be able to insure only those who are well enough to be employed. They want to be able to quibble over coverage terms, kick customers requiring expensive treatment out of their plans, or to refuse coverage because of pre existing conditions.
Consumers now covered by employer insurance are beginning to realize that ever-increasing premiums and co-pays give them ever-decreasing coverage, leaving them with unanticipated bills. If they lose their jobs, they lose their insurance, and heaven forbid they develop a pre-existing condition. Expect Democrats to characterize the availability of a public option as providing an affordable safety net.
For-profit insurers argue with a blatantly anti-consumer litany: “We cannot compete with a government plan because consumers will like it so much they will not choose us; therefore we do not want to give consumers a choice.” Everywhere in the industrialized world, all but the United States have national health plans, and for-profit insurers have been able to compete, making a profit, too. U.S. for-profit insurers are not fighting for their lives or for consumer choice; they are fighting for their current business models.