WP: They will fight to keep flexibility to design benefits as they see fit; in other words, low-cost policies that don’t cover very much. They will insist on flexibility to continue designing more products that shift the financial burden to consumers. That will enable them to market leaner benefit plans, and it will let them market “voluntary” plans to certain employers that have high employee turnover. These plans don’t require financial participation by employers. Insurers want to have the flexibility to continue designing plans that cover less and move further and further away from the concept of insurance to personal responsibility. Insurers want people to have “more skin in the game,” and they want to have less.
TL: What else will they fight strongly for?
WP: They will fight to keep the ability to base rates on age. That will be a way to keep charging the most to people who are likely to be the sickest. That will enable them to offer cheaper policies to younger and healthier people, and that is the market where the competition will be.
TL: If there is an individual mandate, how will the industry benefit?
WP: They have the potential for millions of more health plan enrollees. The ability to have flexible benefit design and base rates on age will allow them to design plans to maximize their profitability.
TL: Why is the industry so powerful?
WP: Over the many years, their PACs and individual executives have contributed to many political campaigns. They’ve hired former members of Congress as lobbyists, such as my former colleague Bill Hoagland, who was a top aide for Senate majority leader Bill Frist and now heads CIGNA’s government relations operation. All the companies have independent lobbying firms working for them. Some are close to Democrats and some are close to Republicans.
TL: How else has the industry strengthened its grip?
WP: Consolidation in the industry into seven dominant carriers makes it more powerful. It has strengthened its grip through mergers and acquisitions. A consequence of this is that, as a few insurers have grown to dominate local markets, doctors and hospitals have organized themselves into powerful conglomerates. As a result, insurers don’t have the bargaining clout they once had with providers and have lost the ability they once claimed to have to control medical costs.
TL: Why is the industry scared of a public plan that would look and act like Medicare?
WP: A public plan could offer the same benefits as a private plan at less costs because it would not have the high administrative costs—which include sales, marketing, and underwriting expenses—associated with most private plans. It would not be under constant pressure from Wall Street to reward shareholders by constantly keeping an eye on the medical loss ratio and earnings per share, another key measure of profitability.
TL: Are the members of Congress who are most vocally against a public plan aligned with the industry?
WP: Yes. One of the things they can exploit is to talk about how a government-run plan would wreck the free market system in health care. Many members of Congress believe the free market can still work with health care.
TL: Can it?
WP: There’s no evidence that it has worked since the Clinton plan failed.
TL: Will we see a reprise of Harry and Louise?
WP: No. The industry knows its image is at an all-time low. So the industry can’t be as obvious in attacking a plan as it was in 1994. They will work through front groups and allies to attack it through ads and commercials.
TL: So what’s happening now with all these ads we’re seeing?
WP: What’s happening now is what happens in primary campaigns. We’re seeing a lot of targeted advertising by advocates of reform, aimed at members of Congress who might be persuaded on the wisdom of a public plan. That’s why you’re seeing a lot of advertising in Maine aimed at Olympia Snowe and Susan Collins. Later in the summer we’ll see more national advertising attacking or supporting aspects of the reform bills. It will be like a political campaign, and it will be very expensive.
TL: How should journalists be covering this middle and last phase of the campaign?