The White House is incorporating this Goldman Sachs conference call with health insurers into its closing argument about why health care reform is so necessary to hold insurers accountable. Health and Human Services Secretary Kathleen Sebelius referenced the report at least twice on Sunday and Obama used it in his pitch today in Pennsylvania:
OBAMA: Every year, insurance companies deny more people coverage because they have a pre-existing condition. Every year, they drop more people’s coverage when they’re sick and need it most….You see, these insurance companies have made a calculation. The other day, on a conference call organized by Goldman Sachs, an insurance broker told Wall Street investors that insurance companies know they will lose customers if they keep raising premiums. But since there’s so little competition in the insurance industry, they’re ok with people being priced out of health insurance because they’ll still make more by raising premiums on the customers they have. And they will keep doing this for as long as they can get away with it.
This kind of behavior may be nothing new, but it’s all the more striking in light of WellPoint’s double digit premium hikes in the individual health insurance market and the administration’s decision to use the increases to tap into the public’s anxiety over increasing health care costs. The most damning part of the report is on page 3 where Steve Lewis, an industry expert with a major insurance broker admits that insurers aren’t competing against each other and seem “more willing than ever” to walk away from expensive clients. “Not only is price competition down from year ago (when we had characterized last year’s price competition as being down from the prior year), but trend or (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes,” Lewis concludes.
Throughout the year, we’ve seen other industry reports suggesting that insurers invested heavily in the individual health insurance market would lose money from reform or, at best, break even. But this report is significant because of its timing and candor. Lewis contradicts all of the happy talk about insurers working together with Congress to extend coverage to all Americans and confirms what Democrats — and to a larger extent single-payer advocates — have been saying for years: insurers make more money by selling product to small groups of healthy customers and routinely purging their rolls to increase profit margins.
But the White House’s anti-insurer push may be prove too little too late. Democrats spent the better part of the health care debate without a clearly defined adversary — coming out against the insurance industry only after the industry released a series of reports in October of 2009 arguing that the weak mandate in the Senate health care bill would increase premiums for families — and spent little time linking common industry practices with personal tragedies of denied coverage and financial hardship. And in some ways, the report makes a better case for elements not in the bill than the existing legislation. The Senate health care bill will certainly improve the status quo by preventing pre-existing condition exclusions, lifetime and annual limits, and other abuses and establishing exchanges in which insurers would have to compete for customers. But these are just small steps towards reforming the kind of practices described in the Goldman Sachs report.
For me, it’s incredibly frustrating that the White House didn’t tout these studies to build early support for provisions that would have done more to increase competition and oversight like the public option or national exchanges. After all, if the White House believes that reports like these are compelling enough for a closing argument, why then, did they not use them in their cross examination?