Insurers' Forecast: Storm in Washington

As Democrats accuse health insurers like Aetna Inc. of dropping small business customers, September promises to be an eventful month for these companies in Washington.

Congressional Democrats, who need to regain momentum on health reform, look to demonize the industry, but at least one analyst is betting on the insurers.

"They're an easy target and they don't have much choice but to sit there and take it," says Matthew Coffina, who covers the industry for Morningstar Inc.

Whether Democrats are talking about executive pay or business practices, they don't appear to have a strong case against the insurers yet, he says.

In the latest sign that companies will be on the political hot seat, a pair of House Democrats sent letters to six insurers yesterday to find out if they are purging small business customers. The letters were sent to Aetna, Humana Inc., Medica Health Plans, UnitedHealth Group Inc., Wellmark Blue Cross and Blue Shield and WellPoint Inc.

"We are now looking into the practice of health insurance companies terminating the coverage of small businesses when their employees become ill and their health insurance claims increase," Rep. Henry Waxman, chairman of the House Energy and Commerce Committee says in a statement. "We need to better understand how widespread this harmful and destructive practice has become, and how it is impacting small businesses and their employees across the country."

Waxman and Rep. Bart Stupak, who chairs an oversight and investigations subcommittee, sent letters to the six companies asking for documentation on insurance coverage for small business, premiums charged and other information. The two Democrats earlier this month asked for information from a group of 50 insurers on executive pay.

Some big insurers, including WellPoint, actively seek out small businesses for insurance policies, Coffina says. Proving that insurers are systematically dumping small businesses is difficult, he says.

"Insurers should have no reason not to insure anyone as long as they can get an actuarial-fair premium," Coffina says. "The problem with the small employer is one or a small group of sick employees can throw off the cost" to insure.