In the Belly of the Beast

Last week, Kathleen Sebelius had the home-field advantage when she summoned a handful of health insurance CEOs to the White House to scold them about recent premium hikes. Today, the secretary of Health and Human Services ventured onto the insurers’ turf, the annual policy meeting of their trade group—America’s Health Insurance Plans—at the Ritz-Carlton Hotel in Washington.

Sebelius told insurers they had a choice: You can continue to fight health care reform, and, if you kill it, you may make more money in the short run, but more Americans will be priced out of the insurance market every year. “Then there is your other choice,” Sebelius said. “You can choose to take the millions of dollars you have stored away for your next round of ads to kill meaningful reform and use them to start giving Americans some relief from their skyrocketing premiums. Instead of spending your energy attacking the parts of the president’s proposal you don’t like, you can use it to strengthen the parts you do.”

AHIP president and CEO Karen Ignagni said health insurers will take Sebelius up on her challenge—to a point: They will get back with her promptly on specific suggestions on improving the bill’s efforts to control health care costs. AHIP also will “further explicate” their other problems with the bill, Ignagni said.

What insurers won’t do is surrender, despite Sebelius’ pleas. They contend the health care legislation passed by the Senate, which will be the framework for the final bill, has too many provisions that would raise health care costs, not lower them. One of those provisions is a new tax on health insurance premiums. Employers—the main customers of insurance companies—agree that’s likely to be passed on to them. Taxing something almost always makes it more expensive. Insurers also contend that rising medical costs—from hospitals, doctors, and pharmaceutical companies—are behind the recent sky-high premium increases in the individual insurance market. Plus, a weak economy is forcing many individuals to drop their coverage, reducing the size of the risk pool.

Sebelius isn’t convinced that’s the only reason insurers are jacking up rates by as much as 39 percent. The lack of “real choice and competition” among insurance companies also is a factor, she said. “When Americans have so few choices, can you blame them for being frustrated when their premiums go up 10 times faster than the cost of health care?” Sebelius said. “Can you blame them for thinking the system’s broken when their health insurance—which is supposed to protect them from exorbitant health costs—still forces them to pay thousands of dollars out of their pocket each year?”

Ignagni, however, reminded Sebelius that AHIP proposed its own health care reform plan even before President Barack Obama took office. It has agreed to insurance market reforms, such as prohibiting insurers from denying coverage to individuals because of preexisting conditions, in return for a requirement that everyone be required to have health insurance. Experts agree an individual mandate is required to make insurance markets reform work Otherwise many people would wait until they were sick to buy insurance. “We are fully committed to insurance reform,” Ignagni said.

AHIP just doesn’t like the bill the president is pushing. Sebelius, however, said the president and AHIP aren’t that far apart. Obama isn’t proposing a “Medicare for all” single-payer system that would put insurers out of business. The final bill won’t even include a government-run option to compete with private insurers. Sebelius’ message to insurers is they should accept what they think is a bad bill because it could have been much worse. That’s a tough sale, and insurers aren’t buying it.