The Center for Public Integrity

For the first time in a long time, my former insurance colleagues and I agree on something: it’s time for affordability.

Health insurers’ big PR and lobbying group, America’s Health Insurance Plans, has launched a slick new campaign, complete with compelling graphics and pithy sound bites, to persuade lawmakers that they need to take immediate action to prevent insurance premiums from going up more than usual.

But while we agree that lawmakers do indeed need to focus on affordability, we disagree on what they should do. Insurance executives want Congress to get rid of some of the most important consumer protections in the Affordable Care Act, a.k.a. ObamaCare. I believe it’s time to focus on the value—or lack thereof—that private health insurance companies actually add to our health care system.

Several years ago, a coworker asked our CEO during a staff meeting what kept him up at night. He responded with a single word: disintermediation.

Merriam-Webster defines disintermediation as “the elimination of an intermediary in a transaction between two parties.” So what my boss was saying was that sooner or later, Americans might reach the conclusion that private insurers are no more essential than travel agents (remember them?), and that by dispatching health insurers to the history books, we could reduce spending on health care by billions if not trillions of dollars.   

Much of what I was paid to do in my former job was to create and perpetuate the impression that insurers are “part of the solution” and “add value” to the system. I put those words between quotation marks because they were used repeatedly by my CEO and other industry leaders and became our mantras, especially in conversations with policymakers and the media.

As Ronald Reagan once famously said, “There you go again.”

The culprits in this case are health insurance companies that want to change ObamaCare so they can keep selling highly profitable junk insurance to young people and keep charging older folks so much in premiums they have little money left over for anything else.

What’s happening now is a repeat of the tactics insurers employed during the final weeks of the health care reform debate. Back then, they papered Washington with a flawed “study” warning that premiums would soar if lawmakers ignored their recommendations. And now insurers are once again disseminating a new study with similar predictions. This time they’re trying to convince us that coverage for all young adults will become unaffordable next year if Congress doesn’t gut an important consumer protection in the reform law.

In 2009, shortly before the Senate voted on reform, America’s Health Insurance Plans —the main industry trade group —hired PricewaterhouseCoopers to estimate how much premiums would increase under the law. The study was quickly discredited, however, when it became clear that the accounting firm had ignored sections of the legislation that would keep coverage more affordable.

The current study, by the actuarial firm Oliver Wyman, also suffers from sins of omission —which raises concerns that this new effort may also have been influenced by the insurance industry. (Oliver Wyman has not responded to my request for comment.)

Even if it didn’t finance the study, which was published last week in the trade publication Contingencies, AHIP is using it as part of its campaign to persuade Congress to delay or repeal a provision of the reform law. That provision, which takes effect Jan. 1, 2014,  will prohibit insurers from charging older people more than three times as much as younger people.

You probably missed it because of the media’s focus on the fiscal cliff, but a provision of ObamaCare took effect on January 1 that can help you avoid making costly mistakes when you sign up for health insurance. At the very least you’ll be able to understand what you’re actually signing up for.

From now on, health insurers will have to provide us with information in plain English, and in no more than four pages, about what their policies cover and how much we’ll have to pay out of our own pockets when we get sick. And they’ll have to provide it in a standard format that will enable us to make apples-to-apples comparisons among health plans. Click here to see an example of what the plan descriptions must now look like.  

As you can imagine, insurers fought hard to kill that part of the law. That’s because they’ve profited for years by using legalese and gobbledygook in describing their policies, and also by purposely withholding information we really need to make informed coverage decisions. 

Now, at long last, thanks to ObamaCare, you can say goodbye and good riddance to “explanations” like this one:

“Benefits are payable for Covered Medical Expenses (see ``Definitions'') less any Deductible incurred by or for a Covered Person for loss due to Injury or Sickness subject to: (a) the Maximum Benefit for all services; (b) the maximum amount for specific services; both as set forth in the Schedule of Benefits; and (c) any coinsurance amount set forth in the Schedule of Benefits or any endorsement hereto. The total payable for all Covered Medical Expenses shall never exceed the Maximum Benefit stated in the Schedule of Benefits. Read the ``Definitions'' section and the ``Exclusions and Limitations'' section carefully.”

One of the most ill-advised promises President Obama made during the health care reform debate was this: “If you like your health care plan, you can keep your health care plan.”

He should have known better. First, insurance companies and employers are far more in control of determining whether or not you can keep your health plan than the government. That was true before ObamaCare was passed, and it’s true today.

Second, ObamaCare will indeed mean that some health plans will no longer be available a year from now. That’s a good thing, despite what you’ll be hearing from companies that make huge profits selling inadequate coverage.

A few insurers have for years used slick brochures and sales pitches to persuade people to buy policies that will not come close to shielding them from financial ruin if they get sick or injured.  Many people who have bought these policies undoubtedly believe they have a health plan worth keeping, especially since premiums for inadequate coverage are usually lower than premiums for real insurance. You can be certain that many of those folks will complain loudly when junk health insurance is banned in 2014 and, in so doing, become unwitting soldiers in the insurance industry’s ongoing battle to gut the consumer protections in ObamaCare.

Back to that first point for a moment. I remember shaking my head when I first heard the President assure me back in 2009 that I could keep my plan if I liked it. To deliver on that promise, the law would have to require employers and insurers to keep offering plans they want to get rid of, and that was never going to happen. A few years before I left my job in the insurance industry I was forced out of a plan I liked—a PPO—because my employer decided to stop offering PPOs to its workers and to move all of us into a high-deductible plan.

Over the past couple of years I’ve met many people who, as my mother would suggest, were wishing their life away. But I quickly understood why.

These were folks in their early 60s—and even some in their 50s—who couldn’t wait until they turned 65. They were literally counting the days until they could enroll in Medicare.

Many of these folks had been uninsured for years because of pre-existing conditions.  They’d been blackballed by insurance companies andcouldn’t buy a policy at any price because they’d been sick in the past. Others were underinsured because they simply couldn’t afford decent coverage. Policies that would better meet their needs were being sold to younger people for $300 a month or less. But for them: at least $1,500.

And even the people with coverage were sick and tired of fighting to get medical bills paid and doctor-ordered treatments approved.

I’m betting every member of Congress has heard these same stories. How, then, could any of them even give the idea of raising the Medicare eligibility age a moment’s thought?

Not only would such a thing be cruel, it doesn’t make sense from an economic point of view. If lawmakers take the time to consider the facts, this idea will quickly fall off the table during the fiscal cliff discussions.

I’ve often said that the Affordable Care Act is the end of the beginning of health reform.  It addresses many problems associated with health insurance, but more must be done to control costs and access real universal coverage. And flaws in the law need to be fixed.

However,  the reform law will end some of the most abusive insurance industry practices,  such as blackballing  folks with pre-existing conditions and cancelling policyholders’ coverage when they get sick.

And health insurance companies now have to spend at least 80 percent of our premiums on actual health care. If they devote more than 20 percent to administrative overhead and profits, they are supposed to send rebate checks to their policyholders. Since that 80/20 rule went into effect last year, consumers have saved almost $1.5 billion, mostly in the form of those rebates, according to a new study by the Commonwealth Fund.

The rule has also resulted in lower premiums for many and elimination of hundreds of millions of dollars in administrative waste. That’s the good news. The no-so-good news is that because the reform law does not give the federal government the authority to regulate rates, many health plans used their administrative savings to boost profits instead of reducing premiums.

That situation reflects not only a flaw in the federal reform law, but also the ineffectiveness of health insurance rate regulation at the state level.  In only a few states do insurance commissioners have the authority to reject unwarranted rate increases, and even in the states that do, many health plans are exempt from state regulatory oversight.

I’ve written before about the tight relationships between health insurance companies and organizations that claim to represent the interests of small employers, specifically the U.S. Chamber of Commerce and the National Federation of Independent Business.

Those two groups have accepted hundreds of millions of dollars over the past two decades from the insurance industry in an effort to kill or weaken health reform initiatives designed to protect consumers, including those who work for small businesses.

The Chamber was the insurers’ organization of choice to derail Obamacare. During 2009 and 2010, America’s Health Insurance Plans —the major industry trade group— funneled more than $100 million of policyholders’ money to the Chamber’s anti-reform advertising campaign.

A decade ago, the NFIB did much of the insurers’ bidding. AHIP and a handful of big insurers bankrolled a front group called the Health Benefits Coalition to block a patients’ bill of rights that enjoyed bipartisan Congressional support. NFIB’s current president, Dan Danner—who was the group’s chief lobbyist at the time—was the Health Benefits Coalition’s lead spokesman.

More recently, the NFIB has been playing a similar role for yet another group that purports to represents small businesses, the Stop the HIT (health insurance tax) Coalition. Insurers are using that group as part of its campaign to get Congress to repeal an Obamacare provision that imposes a fee on some insurance policies. Revenue from the fee will help subsidize coverage for millions of low-income folks who are currently uninsured.

Although it’s a few days past Thanksgiving, I’m still feeling grateful, even to much maligned federal employees. Last week bureaucrats at the Department of Health and Human Services did us a big favor by resisting pressure from insurance company executives. Those executives wanted to keep charging some of us more than others and to keep selling policies that offer far less coverage than we need.

HHS Secretary Kathleen Sebelius reaffirmed last week that starting in 2014, insurance firms will not be able to discriminate against us nearly as much as they can now because of our age, gender and health status. And they won’t be able to sell policies with deductibles that are unreasonably high and benefits that are dangerously skimpy.

Among the long-awaited Obamacare regulations from HHS were those that further define the “essential health benefits” that health plans must offer in the future and that limit the amount of money we will have to pay out of pocket if we get sick or injured.

Even though HHS did give the insurance industry some wiggle room on the essential benefits and the upper limits of deductibles they will be able to charge, the integrity of the reform law was protected.

This is important for everyone but especially for those of us who have been around a bit longer. Many of us are now uninsured. That’s because we can’t get coverage at any price due to preexisting conditions or can’t afford what’s available to us because of our age. HHS reassured us that not only will we be able to join the ranks of the insured, we’ll be able get policies that are actually worth buying.

Disruption.

Get ready to hear that word many times in the coming weeks, especially if you hang out inside the Washington beltway.

“Disruption” will be the new buzzword in an upcoming advertising campaign aimed at scaring us. The campaign is selling the idea  that millions of Americans will face higher premiums and possibly be forced into health plans with skimpier benefits — i.e., disrupted — if Congress doesn’t repeal a provision of the Affordable Care Act (ACA) that raises money to pay for expanding coverage for the uninsured.  

The greed of the health insurance industry knows no bounds. Insurance companies will get billions of dollars in new revenue every year as a result of the health act’s requirement that, starting in 2014, we will have to buy coverage from private insurers if we’re not eligible for Medicare or Medicaid.

The Congressional Budget Office estimates that 32 million uninsured Americans will finally get coverage as a result of the law. While many will be newly eligible for the Medicaid program, millions of others will get subsidies from the federal government to help them buy private insurance. So insurance companies will get new premium revenue not only from individuals and families but also from the government.

To help finance this expanded coverage, the ACA includes a premium fee on insurers and their business customers that provide the highest level of coverage (like the so-called Cadillac plans). The fee, which is estimated to raise $87 billion over ten years, will go into effect simultaneously with the individual mandate.  

Health insurers invested a lot of what you paid them in premiums in an effort to get more of their friends elected to Congress. As the Center for Public Integrity reported last month, the political action committees of the 11 largest health insurers and their biggest trade group—America’s Health Insurance Plans (AHIP)—gave $10.2 million to federal politicians between January 2007 and August 2012. Most of that money went to Republicans who pledged to repeal or gut the Affordable Care Act.

The return on that investment was not so good. But that doesn’t mean insurers have come to accept that Obamacare must be implemented as Congress intended. On the contrary, even more of your premium dollars are about to be spent on a propaganda campaign to get the law changed to protect profits.

Even as insurers were helping to bankroll their friends’ campaigns, they were  publicly expressing support for the reform law. AHIP president Karen Ignagni said in April 2010, a month after the president signed the Affordable Care Act,  that her group was “strongly committed” to its “successful implementation.”

What she really meant is that insurers were committed to the parts of the law they like—such as one that requires us to buy coverage from them—but not so much to the ones that might negatively impact their bottom lines. Like those that will end the abusive practices that have enabled them to pad those bottom lines.

When Ignagni and insurance company executives speak, it is important to parse their words to understand what they are really saying. That’s just as true now as it was in 2010.

Here’s what Ignagni said after it was clear that her industry’s campaign investments had not paid off last Tuesday: