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The Strange Role of the Insurers

I feel for Karen Ignani, head lobbyist for the health insurance industry. For the last year, her group has been by far the most cooperative of any major industry stakeholder. It has attended every summit and signed every letter. It has made substantive concessions and readied itself for a new business model. And even with all that good faith dealing, it's still becoming public enemy number one for health-care reform. The president is still going around touting his eightfold path of consumer protections, all of which are protections from the worst actors in the insurance industry. “The rhetoric that we are hearing is reminiscent of ’93, ’94, but we’re on the 2009 playbook,” sighs Ignani. “The inconvenient fact is that we support those reforms.”

The big question right now is whether the focus on the insurance industry refashions the insurance industry into an enemy of reform. Many in Ignani's organization want her to dump $100 million into an aggressive ad campaign that will return some fire. But I don't think she will. Insurers might be taking a few more hits publicly, but nothing has changed for them. As Ignani herself says, they've already signed onto the set of consumer protections envisioned in health-care reform. There's no further cost to having the president talk about the unsettling practices that led to those protections.

In a way that's not true for doctors or hospitals, drugmakers or device manufacturers, insurers actually do want health-care reform to happen this year. The reason is simple: It reduces their uncertainty. It's very hard to imagine a health-care system without doctors and hospitals, or drugs and medical technology. But it's very easy to envision a heath-care system without insurers. They don't provide anything of obvious value that couldn't be provided by Medicare. And they're wildly unpopular, which accounts for their sudden elevation in the health-care reform debate.

None of that really matters in this conversation, because they're not in any real danger. But who knows about the next one? Or the one after that? As costs get worse and the need for radical reforms becomes more acute, it becomes more and more likely that a future stab at health-care reform will substantially harm insurers. So better to participate in the process they can trust then hope that the next iteration won't coincide with an uncommonly populist moment, or a particularly acute crisis, or be sparked by a particularly horrible rescission story.

By Ezra Klein  |  August 4, 2009; 9:27 AM ET
Categories:  Health Reform  
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Next: Will Durst Is Coming


The antipathy toward insurers as opposed to providers may be due to relative success at PR, at which providers have a clear advantage (being at the sharp end and being motivated to provide more, not less, care).

The health econ literature suggests that it is providers that bear greater responsibility for high health care costs. See

Posted by: TheIncidentalEconomist | August 4, 2009 9:44 AM | Report abuse

The insurers want, and know they badly need, a BAILOUT. They are on board as long as, and to the extent that, the bill that emerges is precisely that. They will ALWAYS fight tooth and nail against genuine reform, and anything they're for<>i> can safely be assumed to be a piece of crap that is not in the public interest.

We will never have a rational system of health care financing until these parasites are out of business. This will happen naturally if we just leave badly enough alone. Passing the Health Insurer Bailout Act of 2009 will only delay their day of reckoning and therefore delay real reform.

Posted by: labonnes | August 4, 2009 10:01 AM | Report abuse

"And even with all that good faith dealing, it's still becoming public enemy number one for health-care reform."

The fact is - insurance companies are not "becoming public enemy number one" as a result of these negotiations, they've earned that title for themselves over a long period of time treating consumers like garbage.

(Ezra - have you ever actually needed health care outside of a checkup? You don't sound like you've ever had to make a claim! I was once woefully ignorant too, then I had babies, which required health care to do - and boy, my eyes were open to the horrible way insurance companies treated patients.)

As Wendell Potter (former insurance exec who developed many of the industry's talking points still in use today) now says, when your business model as a health insurance company is to grow shareholder value, consumers who need health care get in the way of the goal.

Posted by: anne3 | August 4, 2009 10:23 AM | Report abuse

I'm really starting to hate health care reform.

At the end of the day I have the feeling that the only thing its going to do is force everyone in America to buy health insurance while getting some hollow consumer protections in place.

The projections will say we'll be saving money, the reality will be that we're spending more, and we have to do this all over again 12 years from now.

Posted by: dugmartsch | August 4, 2009 10:38 AM | Report abuse

This proclamation of innocence of the corporate insurance industry doesn't sell well. Their skimming of 30% of the health care dollar is at the heart of the problem, and their exclusion practices are simply one of the bag of tools they use to get that 30%. Wendell Potter, the converted CIGNA executive, has stated it well.
Every time a doctor or a patient has to fight the insurer to get coverage it's one more well earned bit of distrust and rage towards these entitites.

Posted by: cmpnwtr | August 4, 2009 10:41 AM | Report abuse

This is satire, right?

Posted by: eRobin1 | August 4, 2009 10:46 AM | Report abuse

Anyone who has every had to file a major claim will have no problem with insurance companies as the bad guy in this scenario.

What angers me is this assumption that the government has some responsibility to insurance companies that is equal or more important than providing affordable health insurance to all Americans.

Posted by: PorkBelly | August 4, 2009 11:00 AM | Report abuse


You know we're not allowed to discuss the possibility that good insurance companies might exist. It's as taboo as suggesting there are some stupid doctors, and some stupid patients.

How dare you try to inject 'nuance' into this debate.

Next thing you know you'll say it's reckless to paint UnitedHealth Care with the same brush as, say, a local, hospital-owned non-profit Medicaid HMO. Or putting Kaiser in the same bucket as Cigna or Aetna.

Posted by: ThomasEN | August 4, 2009 11:03 AM | Report abuse

This is a strange dynamic in that the insurance companies are on board with reform, but the reforms the insurance companies are on board with are not assured. Have the Republicans come out for the set of insurance reforms in the bill? Community ratings, all policies must have certain requirements, etc. Since they have not, no health care reform at all is a possible outcome and those against health care reform are in fact campaigning for the status quo in insurance practices as well, rather loudly. It's fair to hold them to that.

However, if health care reform works as designed, less American's purchase the 50 % overhead "fake" insurance you buy on the individual market and more buy something closer to the 5 % overhead real insurance a large employer can get for you. Also, a public option squeezes margins closer to non-profit status. Do the insurance companies think this is inevitable or do they think the reforms won't work as designed?

Posted by: windshouter | August 4, 2009 11:06 AM | Report abuse

What eRobin1 said.

Everyone knows the moment the 'public option' becomes part of the bill, Ignani will be dumping $100 million and then some into a campaign to destroy it.

That's what the insurance companies really fear.

Posted by: leoklein | August 4, 2009 11:08 AM | Report abuse

how can you write of insurer attitute toward current health reform efforts and ignore their stance on the "public option"?

Posted by: jamesoneill | August 4, 2009 11:41 AM | Report abuse

From Igor Volsky at the Wonk Room:

The industry may not be re-playing the old ‘Harry and Louise ads,’ but it’s certainly twisting the legislation in its favor. If reports about the Senate Finance Committee’s bill are accurate — the bill will not contain a public option and would allow insurers to charge older Americans more than 7.5 times the rates charged to younger Americans — then the $173 billion the industry has spent on lobbying Congress was certainly a smart investment.

Posted by: eRobin1 | August 4, 2009 1:02 PM | Report abuse

Other countries get better results at less than half the cost per patient. Clearly we can learn something from them. We do not have to invent the wheel. But this posting acts as if we are the only country in the universe. The reason is never stated, but it is clear. The most important principle in health care for the media is to preserve the income of health insurance executives and their wealthy stockholders. That is why we can't learn from other countries. That is why all of the proposal being considered are so complicated.

The goal of a well run corporation is to make money for shareholders. In the case of health insurance companies this is in conflict with providing good efficient health care to the country.
The for profit insurers have learned that the way to get a high stock price is to have a low Medical Loss Ratio which is the percentage of inflow (premiums) paid out in medical benefit to patients. Notice that they consider medical benefits as "losses."

They do this in two ways. They make the numerator smaller by making it difficult for doctors and patients to collect. They make the denominator larger by obscene executive compensation, high profits, billions spent processing complicated forms they require of physicians and patients, and still more billions spent on fighting with doctors and patients over coverage and payments. See the SEC fillings for the Medical Loss Ratios and a recent Commonwealth Fund Study for the difficulty patients and physicians have with coverage and payments.

Because all of the current proposals try to fix health care but keep the cancer of for profit insurance, they are horrendously complicated. They run about 1,000 pages. HR676, Medicare for All, not only gives good health insurance to everyone, it solves the problems of pre-existing conditions and the situation where loss of job implies loss of health insurance. Furthermore, it costs less than any of the current proposals because it will save us $500 Billion each and every year by the elimination of the high overhead (= 1 - Medical Loss Ratio) and huge compliance costs of both physicians and patients. Also it will make it easy to crack down on the wasteful "marketing" of drug companies. In fact, studies have shown that we can get all this and it will not cost us anymore than we are already paying and probably less.

HR676 is 70 pages long.

Posted by: lensch | August 4, 2009 1:22 PM | Report abuse

I'm still looking for the tags around this post. Insurance companies have talked a great game, but (as the answers at the rescission hearing showed) embracing reform is pretty easy if you don't actually have to change any of your practices here and now.

Posted by: paul314 | August 4, 2009 3:01 PM | Report abuse

Ezra joins Wapo
Ezra defends health insurance lobby

Posted by: akmakm | August 4, 2009 4:42 PM | Report abuse

Well, it kinda makes you wonder how much more cooperative they might have been if our Congressmen had put single-payer on the table and considered it seriously.

I'm sure they did attend every meeting- just as you would if the Gigantic Corporation was planning to build something really large in your neighborhood. Of course, you and I don't get to deduct the cost of attending those meetings from our income when we're figuring the net for taxation.

It does seem like Ezra is starting to display a few symptoms of Stockholm Syndrome. The only real problems I see for the insurance industry in health care is that their "business practices" have left them with the most dissatisfied customers ever. But strange to say, they still laugh and joke on the way to the bank just as though there would be no tomorrow.

My dad explained all of this to me in about two sentences when I was 7- the big companies complain bitterly about new regulations, and then in a few years they're the ones writing the regulations and their people are the members of the commissions and oversight committees. This latest go-round is starting to look depressingly familiar.

Posted by: serialcatowner | August 4, 2009 6:26 PM | Report abuse

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