Health Care Reform Insurance Companies Can Believe In

By Bill Boyarsky

It’s now clear that health care “reform” is a bonanza for the insurance companies. But these acquisitive businesses want even more. Their efforts to increase their profits are at the center of the clandestine Senate and House negotiations currently shaping the health bill.

First of all, they want to stiffen a requirement that millions of Americans buy insurance. For many among those millions, this would mean facing “the uneasy choice of buying insurance they can’t afford or paying a stiff penalty they also can’t afford,” as Sen. Charles E. Schumer, D-N.Y., put it.

The bill approved by the Senate Finance Committee imposes a penalty of $750 a person on those not buying a policy. That isn’t big enough for the insurance companies, which have eagerly anticipated the day when everyone must purchase a policy. “This [what the industry considers a low penalty] is likely to result in millions of people foregoing coverage,” said the BlueCross BlueShield Association.

The fines are a major issue as senators meet with administration officials to prepare a bill that will eventually go to the Senate floor for a vote. The penalties are in every version of health care legislation floating around Congress.

They are also important to a growing segment of the economy: those fired from companies that have downsized, gone bankrupt or simply closed their doors. Such people are now thrust into the competitive and complex private insurance market. Under the bills pending before Congress, they would be eligible to buy insurance in government-sponsored exchanges. These would provide places—probably Web sites—where consumers could pick from a variety of insurance policies. Moderate- and low-income Americans would be eligible for government subsidies; the poor would receive Medicaid. But even with subsidies, the policies will not be cheap. Some hard-pressed families would be forced to opt out of insurance.

According to estimates in an interactive chart compiled by the Henry J. Kaiser Family Foundation, under the Senate Finance Committee bill a family of four headed by a 52-year-old and with an income of $60,000 a year would receive a $7,522 subsidy but would still have to pay $6,263 a year for its $13,886 annual premium. That’s high for a family with that level of income.

Subsidies would be higher for those earning less. Families with incomes exceeding roughly $90,000 a year would not get a subsidy. 

The insurance industry’s biggest sales targets would not be these families; it would focus on young people, who generally have a low illness rate.

The Kaiser Family Foundation estimates that a single 30-year-old earning $43,200 a year could buy a health insurance policy for $6,607. A $1,423 subsidy would bring the annual cost down to $5,184. The insurance industry figures that this person—classified in the business as a “young invincible”—would rather pay a $750 fine than $5,184 in premiums. That is why the BlueCross BlueShield Association and America’s Health Insurance Plans, the industry lobbying group, want to hit these young invincibles with higher fines.

The companies are expected to continue to expand marketing strategies to persuade the young to buy insurance. Judy Dugan, research director of Consumer Watchdog, warned that the insurers would “cherry-pick” young people, offering free gym memberships and other health-oriented programs. “They will try to attract the healthy and young,” she said, leaving the older and potentially less healthy segments of the population to the insurance exchanges.

The insurance companies also want to be free to charge high prices. That is why they don’t want the government selling policies—the public option—in the exchanges. “They don’t want the government selling what would likely be cheaper policies,” Dugan said.

To sum up, the insurance lobbyists’ goals are clear:

—No government option.
—Stiff fines so almost everyone will buy policies.
—Maintenance of the monopoly status that big insurance companies have in most areas.
—Lax regulation so the companies can sell policies with terms and prices so complex that few consumers will be able to understand them.

Congressional friends of the consumer are playing defense. For example, Sen. Patrick Leahy, D-Vt., has been fighting the insurance monopoly for years, and lately he has been joined by Sen. Schumer. Don’t count on them winning.

President Barack Obama gave the advantage to the insurance companies and other members of the medical lobby early in the game when he turned over leadership to Chairman Max Baucus of the Senate Finance Committee and other conservative small-state Democrats, plus Republican Sen. Olympia Snowe of Maine. Baucus is a leading recipient of contributions from health industry firms and their lobbyists, having received $453,649 in 2007-2009, according to a study by the Sunlight Foundation and the Center for Responsive Politics. The study found “a web of campaign contributors” deeply involved in the health care fight.

Obama also signaled in his health reform speech to Congress last month that he was willing to abandon the public option. These concessions cost him control.

The president was hurt even more by media fascination with the so-called grass-roots rebellion against health reform during the summer. Also damaging was media failure to cover peaceful pro-reform demonstrations against insurance companies. As Peter Dreier and Todd Gitlin wrote in the Columbia Journalism Review, “No one packed heat, no one screamed at a member of Congress, no one called anybody a Nazi, no fistfights broke out. So—no story.”

Some sort of health legislation is expected to reach Obama’s desk. But for it to have any meaning—to provide a framework on which he can build something stronger in the future—he must crush his arrogant opposition. He should start with Big Insurance.

Bill Boyarsky is the author of six books. His latest is “Inventing L.A.: The Chandlers and Their Times” (September 2009).

AP / Evan Vucci

Flash cards: Senate Finance Committee Chairman Max Baucus holds up a note with a smiley face and another that reads, “Do Not Take THE BAIT!!” Shortly afterward, the Montana Democrat called to order an Oct. 1 session of a hearing on health care reform legislation.