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Insurers Oppose Health Reform

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"Insurers Oppose Health Reform"

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Throughout the health reform saga, AHIP, the industry group for health insurance companies, has sought to position itself as favoring reform. At the same time, left-wing critics of the bill, joined by a minority of right-wing critics of the bill, have sought to characterize the reform effort as a giveaway to the insurance industry. But as National Journal reported yesterday, the reality is that insurers have spent huge sums of money on television ads aimed at defeating reform:

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.

And Igor Volsky observes that this is hardly the only thing insurers have done to try to block 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.

The insurance industry is much less popular than other interest groups with a stake in reform, so it doesn’t like to be seen as publicly spearheading the charge against reform. But the fact of the matter is that even though the new mandate/subsidy structure will give at least some insurers a bunch of new customers, the medium-run trajectory of reform is bad for private insurers. Right now, insurers are largely shielded from competition and are almost 100 percent immune to needing to please their actual customers, getting to deal with HR bureaucracies instead. In an Exchange-based world, individuals will be choosing from among several plans and insurers will be accountable to customers. What’s more, the principle that it’s the government’s job to make health care work will lead to pressure for further regulations and further squeezing of industry profit margins.

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And it’s also worth saying that though we’ve mostly heard about opposition to the tax on “Cadillac” health plans from unions, this policy will be very bad for insurers. The non-taxability of compensation received in the form of health insurance constitutes a gigantic and totally undeserved subsidy for the insurance industry. Imagine if I passed a law saying “if you receive some of your compensation in the form of a ridiculously expensive watch” then you don’t need to pay taxes on it. Some of the benefit of that tax break would accrue to middle class taxpayers, but the primary beneficiaries would be the vendors of expensive watches (recall yesterday’s post on tax incidence).

Without the tax break, more compensation will come in the form of cold, hard, cash and less will come in the form of subsidized health insurance premiums. If people want to plow that cash back into premiums, they’ll be free to do so. But if insurers want to get their hands on that money, they’ll have to actually make it worth people’s while. Instead of giving your money to insurers, you might want to spend it on a gym membership or some superfoods or a new iPod or an unreasonably expensive watch. You might even just take your money and give it to a medical professional in exchange for health care.

It’s true that some people covered by collective bargaining agreements will take a temporary hit as a result of this switchover. But that’s basically a transitional issue. The insurance industry, by contrast, will be taking a permanent—and massive—hit by the removal of their pet subsidy.

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