In Deadly Spin, insurance insider Wendell Potter describes how insurers rely on public relations firms to handle moments of crisis. The industry brought on APCO to discredit Michael Moore’s SICKO, worked with PR companies to shape their message during the health reform debate and consulted these companies when dealing with a death of a beneficiary to whom it had denied treatment. As Potter explains it, these groups have the contacts and the know-how to distribute industry talking points to editors, columnists, think tanks and reporters in a way that distorts their origin and boosts their legitimacy.

This approach is very effective in shifting public opinion and perceptions. The final health care law was fairly similar to AHIP’s original plan and it’s likely that the industry’s attack ads (funneled through the Chamber of commerce) and slew of negative made-to-order reports about reform probably had some impact in shifting the bill further to the right. With that said, it’s troubling to see that the industry is now re-grouping and looking for new PR representation as it moves into the all-important implementation phase of reform:

Five of the nation’s largest health insurance companies are taking a key step toward building their own inside-the-Beltway coalition to influence implementation of the new health law and congressional efforts to change it. The companies – Aetna, Cigna, Humana, UnitedHealthcare and Wellpoint – are shopping around Washington for a public relations firm to represent them, according to a source familiar with their work. Public Strategies and APCO are among PR firms that have spoken with the insurers, the source said.

“They plan to go public,” the person said. “They spent a ton of money [in 2009 on lobbying and the election] and liked being influential and they don’t want that to go away.”

The unfortunate thing for advocates of health reform is that with a Republican Congress — which came into power with the help of contributions from the industry — influencing the debate shouldn’t be terribly difficult, particularly when HHS is already “expanding quality bonuses to Medicare Advantage plans that receive only average quality ratings.” Agreeing, in other words, to the industry’s demands before they even settle on their PR representation. Imagine the other provisions insurers will be able to successfully water down if there isn’t serious push back on Capitol Hill and the advocacy community.

In his new book, ‘Deadly Spin‘ out tomorrow from Bloomsbury Press, former Cigna communications head Wendell Potter details how the health insurance industry relies on multi-million dollar public relations campaigns to deceive the public about the nature of the health care crisis and reform itself. Following a playbook developed by the tobacco industry, Potter describes how the insurance industry relied on professional public relations firms and a wide network of news outlets and conservative think tanks to move public opinion against progressive reforms like the public option and ensure that the health law did not interfere with its profits.

After years of unease with the industry’s practices, Potter left the industry following his company’s successful campaign to deflect blame for the death of 16-year old Nataline Sarkisyan, to whom it had initially denied a liver transplant. “It became clearer to me than ever in a way that it hadn’t before, that I was part of an industry that would do whatever it took to perpetuate its extraordinary profitable existence,” Potter writes in the book, noting that the cost of the transplant — about $250,000 — was approximately the same amount CIGNA had spent on a six-hour ‘Investor Day’ meeting to announce its earnings just days earlier.

In a wide-ranging phone interview with me this afternoon, Potter reflected on his role in the Sarkisyan PR offensive, the industry’s exhaustive and often effective PR efforts, and how it shaped the Affordable Care Act:

Q: In the book, you describe how the industry was able to deflect blame for Nataline Sarkisyan’s death by commissioning third-party columns and articles which criticized then-Presidential candidate John Edwards for publicizing Sarkisyan’s case and vilifying the industry. How does that kind of campaign come about? Did you directly call reporters?

POTTER: It’s often done indirectly. I had my own relationships with reporters, but that is when it’s important to have an APCO on your side or a paid agency on your side because they have very good connections with think tanks, because that’s what they do.

Part of what they do is to make sure they have those third parties lined up when you need them. And the way it works is you have a big conference call with the big PR firm and they will often mention some of the folks they will reach out to, to do something to write something, whether it be a defense or present your point of view. That’s the way it happens. That’s what they do. When insurers pump money into special projects into AHIP, over and above regular dues, it’s for this kind of work.

Q: Did the industry message health care reform the same way? How did the industry spread its talking points during the reform process?

POTTER: Generally, there are two parts to the strategy. One is what they’re doing publicly, what you can see. The other is what they’re doing behind the scenes — working with PR firms like APCO and through the think tanks.

They approach this very strategically. It’s important to note that the committee that I was on for quite a while, the Strategic Communications Committee, they’ve been working on this for a long, long, time well before the elections were held in 2008. They see all these organizations as ways to communicate with public opinion.

Think tanks are particularly important because they have good connections. The Heritage Foundation, CATO, the American Enterprise Institute and the Galen Institute and a few others that issue reports and commentary and people from those organizations themselves have connections to the media, can get op-eds placed in the Wall Street Journal and other places.

Insurers also work through their PR firms with T.V. producers, in particular, the conservative talk shows like Fox. They see that as a very very important place to go to get their point of view across and the producers are probably on speed dial.

Insurers also worked for a long, long, time, as I did when I was with Cigna, to develop relationships with reporters in the mainstream media. I certainly had very good relationships with reporters from the Wall Street Journal, the New York Times, USA Today.

Q: I suppose what exemplifies this two-prong approach was the revelation that six of the nation’s biggest health insurers were quietly “pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills” from September to December 2009 — all the while publicly embracing the idea of universal coverage. What was the industry thinking? Did they want to alter reform or did they want to kill it?

POTTER: It was to move it to the right, to weaken it, to have a greater bargaining, more leverage at the bargaining table. It was not to kill it, even though the Chamber and others were running ads that had that objective, for the insurers it was to weaken the resolve of members of Congress and the White House and to be able to get more of what they want in the final legislation and certainly, and this is part of the longer term strategy, to try to get more Republicans and industry friendly people in Congress. The work that the Chamber did certainly contributed a great deal to the changes in attitudes towards reform.

Q: What goal did the industry have going into the health care debate?

POTTER: The primary goal was to make sure that any reform that passed included an individual mandate. And they talk about making sure it was what they call, an enforceable mandate. Which is why they got very upset with the Senate version of the bill, once it finally reached the floor of the Senate, because the penalty was weakened from what they thought it would be. They also saw an opportunity with reform to have an individual mandate, because it would bring them so much more in new revenue and increase their profits.

Q: Do you think the industry believes they would have been better off without reform? Are they happy this bill passed?

POTTER: I think they have to realize that they’re better off with this. Their business models were not sustainable without reform.

They lost their means of being able to control costs like they felt they could do at the beginning of the managed care era. There was such a push back, they lost a lot of their leverage with providers, certainly with consumers. Their magic bullet now is to shift costs to consumers. You can’t keep doing that. It’s not sustainable over the long haul. You would continue to have more and more uninsured and underinsured because of the cost-shifting. You can’t keep doing that, people will ultimately decide that the coverage is not worth buying. So they have to have reform, they needed to have this infusion of new revenue [from the mandate].

Q: Is the administration doing a good job in responding and combating the industry’s communication tactics?

POTTER: I think they have not been. I was baffled during the debate that there didn’t seem to be a strategy behind their communications supporting the legislation. I kept thinking, well they’ll be coming out pretty soon, they must have a very good strategy for selling this, but in my point of view it never materialized.

It’s much easier to condemn something with a soundbite than to describe and counter that kind of stuff and to explain legislation that is very complex, clearly. But I just think they never were up to the task of doing it. It never looked to me like they knew what they were doing.

Q: The White House can’t seem to settle on a persuasive frame. They began with an economic argument, shifted to discussing the consumer protections in the law, and now they’re back to the economic messaging. If you were advising the White House, knowing how the insurance industry communicate, what would you tell them to do?

POTTER: It has to be done in a way that connects with people emotionally. I was going nuts when they were talking about bending the cost curve. You don’t talk policy wonk stuff and expect people to understand or connect with what you are saying. What they’re going to have to do going forward is figuring out a way to get the message in terms that connect with people emotionally — how people would benefit from the legislation right now and what the cost would be to repeal or retool it.

Q: How will insurers influence the implementation of health reform? It seems like they’re now focusing on influencing state governments.

POTTER: If you think they are influential in Washington, they are incredibly influential in the state capitols. Insurers have retained council in every state, they hire lobby firms in state capitols that are well connected. They are very well connected with the insurance regulators and lawmakers, Republicans and Democrats. Cigna, for example has a very significant state government affairs staff. The whole reason for its existence is to develop relationships with regulators and legislators to try to influence the way regulations and laws are written and implemented. You can rest assured they will be working very closely with the Republican Governor’s Association to persuade Republican governors to go implement an exchange model that has few consumer regulations. They will do what they can to make sure that the implementation on the state level is weak.

Interview has been condensed and edited.

Last September, ThinkProgress reported that despite its public support for health care reform, the insurance industry was engaged in a “duplicitous” campaign to undermine the effort. Now the National Journal has confirmed that from September to December 2009, “six of the nation’s biggest health insurers began quietly pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress.” The companies used America’s Health Insurance Plans — the lobbying arm of the insurance industry — “as a conduit to avoid a repeat of the political flack that hit the insurance industry after it famously ran its multi-million dollar ‘Harry and Louise’ ads to help kill health care reforms during the Clinton administration”:

That money, between $10 million and $20 million, came from Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and Wellpoint, according to two health care lobbyists familiar with the transactions. The companies are all members of the powerful trade group America’s Health Insurance Plans. The funds were solicited by AHIP and funneled to the U.S. Chamber of Commerce to help underwrite tens of millions of dollars of television ads by two business coalitions set up and subsidized by the chamber. Each insurer kicked in at least $1 million and some gave multi-million dollar donations.

Watch a compilation of some of these ads:

The industry’s covert ad campaign isn’t the industry’s only means of wasting millions of premium dollars on sabotaging reform. As former health insurance executive Wendell Potter told ThinkProgress, insurers are using a variety of front groups to advance a hidden attack campaign. The industry regularly feeds talking points to right-wing media like Rush Limbaugh and Fox News, mobilizes anti-reform “grassroots” groups and coordinates with conservative think-tanks to produce academic-appearing reports to advance their cause.

The insurance industry has also funded state efforts to challenge the constitutionality of health reform. Insurers have “spent heavily on political contributions” in the 14 states seeking to ratify constitutional amendments that would repeal all or parts of the new measure and contributed thousands of dollars to the attorneys generals seeking to disqualify reform. Earlier this month, Lee Fang reported that Blue Cross Blue Shield Association “played a pivotal role in crafting this anti-health reform states’ rights initiative.”

National Journal’s report should be the last nail in the coffin of AHIP’s public charm campaign. Throughout the health care debate, AHIP President and CEO Karen Ignagni repeatedly reassured the public that insurers were committed to health care reform and even produced a plan for reforming the system. “We understand that we have to earn a seat at the table,” Ignagni told Obama during the White House Health Summit in March 2009. “You have our commitment to play, to contribute, and to help pass health care reform this year,” she promised.

Even after the industry sponsored several reports criticizing reform legislation, AHIP always reiterated the insurance industry’s “commitment” to reforming the health system. “We don’t want to let Americans down. It’s very important. We promised that we are committed to this. Our industry is for-square behind it, but we have an obligation to explain how to make that happen,” Ignagni told Congress in October, as her industry was donating millions of dollars to defeat reform. In fact, insurers have long been dues-paying members of the Chamber. AETNA has given $100,000 to the Chamber, while Unitedhealth Group payed at least $20,000.

During today’s Michigan Business and Legislative Forum, which the Wonk Room attended, a representative of Blue Cross Blue Shield of Michigan admitted that insurers could circumvent the market regulations proposed as part of health care reform.

In answering a question about insurer market share, Mark Cook, Vice President of Governmental Affairs at BCBS Michigan, criticized for-profit insurers for maximizing their profit margins by only covering the healthiest and youngest applicants. “[I]f you have a business model that basically says, ‘I’ll take 25-year-olds until they get sick.’ That’s a great business.”

Cook conceded that health reform would not eliminate such risk selection. In a separate conversation with the Wonk Room, Cook agreed that that despite industry concessions to accept applicants with pre-existing conditions, existing health reform measures would not prevent insurers from designing benefit packages that excluded sicker populations:

WONK ROOM: I’m just wondering in terms of designing benefit packages the standards in the bill, at least the ones I’ve seen, at least the Baucus ones are actuarial standards, so you can design packages that kind of hide packages behind high deductibles, things like that.

COOK: Yeah I suppose there could be some , um, some industry folks could take, how do I want to put this? Could take, um, a low benefit design and try to market it heavily to a young, healthy population or something like that.

WONK ROOM: Right, you can design packages that attract different pools, right?

COOK: I suppose there could be some gaming that goes on around that if that is the design that ends up happening.

Watch it:

The Baucus bill requires insurers participating in the Exchange to offer plans in four different tiers. Each plan would have to meet a different actuarial-value. In the silver tier, insurers would have to cover 73% of the health care expenses of an average population; the remaining 27% would be picked up by individuals.

But Sarah Lueck at the Center on Budget and Policy Priorities warns, and Cook seems to agree, that “an actuarial-value standard on its own” would not prevent insurers from designing packages that would attract healthier applicants and deter “enrollment by those in poorer health.” “For example, insurers could offer a benefits design that omits or severely limits services needed by people with serious medical conditions, while offering richer benefits in other areas such as vision care or health-club memberships. In that way, an insurer could meet an actuarial standard while designing a package calculated to deter sicker people (by failing to cover basic services they need) and attract healthy ones.” Insurers could offer cheaper preventive services without any cost sharing but cover more expensive services only after a high deductible is satisfied.

As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”

Transcript: Read more

Chairman Max Baucus’s (D-MT) original mark of the Senate Finance Committee’s health care bill used a modified community rating formula that allowed private insurers to charge older people five times more for coverage than younger people, a ratio that far exceeded the Kennedy and House bills’ 2:1 rating. On Tuesday the Chairman modified his mark with an amendment that lowered the rating to 4:1 and sparked a harsh response from the health insurance lobby.

In fact, today, in its second letter to the Chairman, America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni criticized Baucus — who is already requiring all Americans to purchase private health insurance — for improving the affordability measure. “If age bands are narrowed or “compressed” too much, premiums will rise significantly for these individuals, making coverage unaffordable, and resulting in a smaller and less stable pool, and higher premiums for everyone,” the letter warned:

The Mark’s original age band of 5:1 already reflects compression, relative to the natural distribution of underlying health care costs across age groups, and sets a balance whereby younger individuals are cross-subsidizing the cost of coverage for older Americans…For these reasons, we respectfully urge that you restore the age band to 5:1.

Ignagni and the health insurers support modified community rating and believe that in order for insurance pools to function, younger people must subsidize the costs of the sick. But insurers are apparently concerned that a 4:1 community rating would jeopardize the industry’s ability to attract a significant number of young people into high deductible policies outside of the exchange (in the remaining individual market). A 4:1 community rating would force insurers to charge younger people higher premiums and would presumably attract fewer enrollees; a 5:1 community rating would allow insurers to charge older people more and market more “affordable” (read: high deductible) policies to young and healthy applicants who pay more in premiums than they file in claims.

As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”

Watch it:

For more on ThinkProgress’ interview with Wendell Potter, click here, here, here, and here.

Earlier this morning Senate Finance Committee Chair Max Baucus (D-MT) unveiled his committee’s health care bill, which has no public option and mandates that everyone buy insurance. While Baucus has failed to garner support from any congressional Republicans and has outraged progressives, there has been one very positive response to his proposal.

Following Baucus’ announcement, HealthNet shares increased by 3%, United Health Group Inc shares rose by 2.7%, Humana Inc. grew by 2.6%, Wellpoint stock gained 1.7% and Aetna Inc rose 1.6%:

Earlier this week, ThinkProgress interviewed Wendell Potter — a former health insurance executive — who pointed out that “every time there is an article in a big newspaper questioning the success of progressives in getting a good bill passed, the stock will go up.” “The analysts/investors don’t think any good reform is going to happen, or anything that would happen that would adversely affect the insurance companies,” he said. Watch it:

In fact, since the President signaled that he is backing away from the public option, health insurance stocks have been on the rise. “Health-care investors are starting to breathe a sigh of relief as they feel the worst case could be averted,” John Sullivan, director of research at Leerink Swann, told the Wall Street Journal in August. “Health-care stocks have risen 22% since late February, when President Barack Obama began his push for an overhaul; the overall market is up 38%” between late February and August.

Today, in testimony before the Democratic Steering and Policy Committee Forum on Health Insurance Reform, health care whistle blower Wendell Potter reminded Congress why a public option is essential to reform. If Congress fails to create “a public health insurance option to compete with private insurers, the bill it sends to the President might as well be called, ‘The Insurance Industry Profit Protection And Enhancement Act,’” Potter said.

At the end of the hearing, House Speaker Nancy Pelosi (D-CA) agreed with Potter. “You cited a public option as one way for it to reach its achieve its goal,” she told him. “We will be passing the ‘Private Insurance Profit Perpetuation Act.’ We have no intention of doing that”:

Mr. Potter, you said it well when you said if we do a plan that doesn’t really achieve its goal, and you cited a public option as one way for it to reach its goal, we will be passing the ‘Private Insurance Profit Perpetuation Act.’ We have no intention of doing that. We want the private sector to thrive — we don’t want our members to go into an exchange where they only have one choice, where there’s sole sourcing. But that the public option provides that competition.

Watch it:

Potter has harshly criticized Sen. Max Buacus’ (D-MT) proposed framework for reform, calling the bill “an absolute gift to the industry.”

“A public option must be created to provide true choice to consumers or reform will fail to fix the root of the severe problems that have been caused in large part by the greedy demands of Wall Street. By creating a strong public option and restricting the insurance companies’ ability to enrich executives and investors at the expense of taxpayers and consumers, HR 3200 [the House health bill] will truly benefit Americans,” Potter said in his opening statement. “The Baucus plan, on the other hand, would create a government subsidized monopoly for the purchase of bare bones high deductible policies that would truly benefit big insurance. In other words, insurers would win, your constituents would lose.”

On the eve of the Senate Finance Committee’s release of its much anticipated health care plan, Wendell Potter – the insurance industry whistle blower and former communications director of health insurance giant Cigna – called the Baucus framework “an absolute gift to the industry.” “And if that is what we see in the legislation, [America’s Health Insurance Plans chief] Karen Ignagni will surely get a huge bonus,” Potter said at a briefing for reporters.

The bill establishes a new regulated health insurance exchange and compels every American to purchase qualified health insurance coverage by 2013. Americans with employer-sponsored insurance can stay in their existing plans, while the uninsured would have to enroll in an expanded Medicaid program, a new plan in the Exchange or the now-regulated individual health insurance market. According to a report released by the Congressional Budget Office, the bill would cover 94% of Americans and cost $880 billion over 10 years.

Potter argued that the lax employer requirements would shift the cost and risk of coverage onto the individual and maintained that the bill’s ‘network of cooperatives‘ would be unable to compete in today’s concentrated health insurance markets. “The co-ops won’t stand a chance,” he concluded.

Reform must also do more to regulate insurers, who have agreed to accept applicants with pre-existing conditions but are insisting on benefit and rate flexibility. Potter argued that the benefit package standards in the Exchange and the high deductible option for younger beneficiaries would allow insures to design almost anything that they can sell in the health market place and push the country towards consumer driven health care.

Under the Baucus legislation, private insurers could also charge older individuals up to five times more for coverage. “You’re just using age as a proxy for health status,” Uwe Reinhardt, an economics professor at Princeton University told the New York Times. Reinhardt estimates that “Senator Baucus’s age-rating plan would allow insurers to cover roughly 70 percent of the additional risk they’d take on by being required to accept all comers, regardless of health.”