I’m usually not a fan of President Obama’s campaign-like policy rallies, but I think today Obama did a very nice job of laying out the case for why we can’t allow insurers to continue running the roost. I just wish he would have said this sooner:

OBAMA: And the insurance companies continue to ration health care based on who’s sick and who’s healthy; on who can pay and who can’t pay. That’s the status quo in America, and it is a status quo that is unsustainable for this country. We can’t have a system that works better for the insurance companies than it does for the American people. (Applause.) We need to give families and businesses more control over their own health insurance. And that’s why we need to pass health care reform — not next year, not five years from now, not 10 years from now, but now. (Applause.) [...]

Every year, the problem gets worse. Every year, insurance companies deny more people coverage because they’ve got preexisting conditions. Every year, they drop more people’s coverage when they get sick right when they need it most. Every year, they raise premiums higher and higher and higher.

Just last month, Anthem Blue Cross in California tried to jack up rates by nearly 40 percent — 40 percent. Anybody’s paycheck gone up 40 percent?

[Insurers] organized a conference call in which an insurance broker was telling Wall Street investors how he expected things to be playing out over the next several years, and this broker said that insurance companies know they will lose customers if they keep on raising premiums, but because there’s so little competition in the insurance industry, they’re okay with people being priced out of the insurance market because, first of all, a lot of folks are going to be stuck, and even if some people drop out, they’ll still make more money by raising premiums on customers that they keep. [...]

This year, insurance companies will be banned forever from denying coverage to children with preexisting conditions. (Applause.) This year, they will be banned from dropping your coverage when you get sick. (Applause.) And they will no longer be able to arbitrarily and massively hike your premiums .

It’s a combative message that cuts through all of the detailed discussions about specific provisions and process and says something that actually resonates. It also corners the opposition: are your with the insurance companies, or are you on the side of the consumer? Do you want to allow insurers to continue practicing a business model that makes more money by denying care or, do you want to lay down a foundation of reform that encourages providers and payers to deliver (and pay for) care more efficiently?

For too long, the White House has ceded this kind of binary argument to the opposition, which has convinced Americans that the beast you know is better than the one you don’t. Fortunately, now that the administration has decided to move ahead with this frame, it should have no problem demonstrating that without reform, insurers will continue to earn profit by denying coverage. After all, they’ve already admitted it:

- WellPoint CEO Angela Braly: “We will not sacrifice profitability for membership.” [WellPoint Inc. Earnings Conference Call, 4/23/08]

- Aetna CEO Ronald Williams: “We have a clear bias toward profitability over growth.” [Hartford Courant, 7/28/09]

- Humana CEO Michael McCallister: “It is important to note if we have to choose between achieving our membership goals and achieving profitability goals, profits will win every time.” [Q4 2002 Humana Earnings Conference Call, 2/3/03]

In November of 2009, Sarah Palin — who is always suggesting that health care reform will lead to socialism — insisted that Canada needs to reform its health care system to “let the private sector take over.“ But this past Saturday in Calgary, Canada — at “her first Canadian appearance since stepping down as governor of Alaska last summer” — Palin seemed to deviated from her fear of Canadian medicine and revealed that her family may have benefited from the Canadian system:

PALIN: We used to hustle over the border for health care we received in Canada. And I think now, isn’t that ironic?

This isn’t the first time Palin highlighted the difficulty of obtaining affordable health care in America. During the presidential campaign, Palin discussed how she and husband Todd had “gone though periods of our life here with paying out-of-pocket for health coverage until Todd and I both landed a couple of good union jobs.” At the Vice Presidential debate, Palin recalled “about times and Todd and our marriage in our past where we didn’t have health insurance and we know what other Americans are going through as they sit around the kitchen table and try to figure out how are they going to pay out-of-pocket for health care?”

Palin’s experience also demonstrates that American medical-tourism to Canada is common, despite conservatives’ claims that Canada’s health care system drives Canadians into the states. “Every year, thousands of Americans undergo surgery in other countries” where they can receive the same care “at half the price.” “In 2007, an estimated 750,000 Americans traveled abroad for medical care; this number is anticipated to increase to six million by 2010″ — far outpacing the number of Canadians coming into the United States for medical treatment. It’s good to know that Palin was once one of them.

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?