The Center for Public Integrity

As I was waiting anxiously for today’s Supreme Court decision, I knew there was a man in Colorado I’d met on the first anniversary of the Affordable Care Act who was likely far more anxious than I was. 

I do not recall the man’s name, but I have kept him in mind in the months since he came up to the podium to tell me after I spoke to an audience in Denver that he knew he was alive that day because of the new law. To me, he came to represent the thousands of Americans whom I know can truthfully say that they probably would be in their graves if not for ObamaCare.

That man was among millions of people in this country who insurance companies have labeled “uninsurable,” meaning they could not buy insurance coverage at any price because of pre-existing conditions. One of the most important provisions of the law that was upheld by the Court today was the one that will take effect on January 1, 2014, the one that will at long last make it illegal for insurers to refuse to sell coverage to people who have been sick in the past.

Knowing that 2014 was too far in the future for people to wait, Congress included in the reform law funding to help states create or expand high-risk pools to cover millions of people whom insurance companies for years wouldn’t touch with a 10-foot pole. That man was among those millions who were finally able to buy coverage that gave them access to life-saving care.

Et tu, Ron?

As President Obama read former Aetna CEO Ron Williams’ op-ed in The Wall Street Journal renouncing his support for a key provision of the health care reform law, he must have felt like Julius Caesar when Caesar realized, as he drew his last breath, that his close friend Brutus was in cahoots with his assassins.

Williams’ betrayal appeared in last Monday’s edition of the Journal under the headline, “Why I No Longer Support the Health Insurance Mandate.” The fact that it was published just days before the Supreme Court was expected to rule on the constitutionality of the mandate made it clear that Williams was not the trusted advisor the President thought he was, that, like Brutus, Williams had thrown his lot with those plotting against the commander-in-chief.

The reason why that opinion piece was such a knife in the back was because it was Ron Williams who possibly more than anyone else had persuaded the President to reconsider his campaign pledge to enact reform without making people buy coverage from a private insurer. Candidate Obama’s reform platform differed from those of Hillary Clinton’s and John Edwards’ in only one significant way: both Clinton and Edwards embraced the mandate, which Williams was championing, first behind the scenes and then publicly, on behalf of the insurance industry. Candidate Obama said he didn’t believe it was right for people to be forced to buy something they couldn’t afford.

Several years ago, when I was still a health insurance company PR guy, I was accused by a furious CNBC producer of withholding important information when I cajoled her into having my CEO on “Squawk Box” to talk about some new initiative we were rolling out.  

“You played us like a Stradivarius!” she screamed at me when she realized that while my CEO was fielding softball questions from her show’s host, our chief financial officer was signing off on a disclosure the company was obligated by the SEC to make by the close of business. Because the news we had to announce was so bad it would have a “material effect on earnings” (translation: cost shareholders a bundle), the big bosses ordered us to wait until after the New York Stock Exchange closed at 4:00pm — and many hours after the Squawk Box interview — to release it. They wanted to postpone the trauma it would cause the company.

Sure enough, when the markets opened the next morning, the company’s stock price began a long slide. The CEO was quoted in the bad-news news release about how the company was taking steps to make sure nothing like that would ever happen again, a statement written for him by the company’s lawyers and PR people, but he was nowhere near a TV camera. Every time he was asked for an interview, we “declined” to make him available. We were not about to make him answer what we referred to as “rude” questions from a reporter. 

That episode came to mind as I read story after story in the mainstream media last week about the decision by UnitedHealth Group to “honor” some of the provisions of ObamaCare even if the Supreme Court declares the law unconstitutional.

The Stradivarius playing I was accused of was nothing compared to the virtuoso performance turned in by UnitedHealth’s PR team. I have seen a lot of masterful work in purposeful misdirection over the years, but I can’t recall a PR coup to top this one. 

In 2007, a few months before I left the health insurance industry, I was tasked to write a “white paper” designed to help convince media folks and politicians that the problem of the uninsured wasn’t much of a problem after all. If demographic data was sliced just so, I was expected to write, it was easy to conclude that many of the uninsured — some 46 million at the time — were that way by choice.

I was told to point out, for example, that a significant percentage of people without coverage were in families with annual incomes of $75,000 or more. The implication: That those folks were simply shirking their responsibilities. A crucial fact that I was not to disclose, of course, was that many Americans, including wealthy ones, couldn’t buy coverage at any price because of pre-existing conditions. These are the “untouchables” as far as insurance companies were concerned. (That’s my term, not the industry’s. The underwriters prefer the term “uninsurable.”)

I also was expected to stress that most young adults — who comprise the largest segment of the uninsured — had chosen to “go naked” because they felt invincible. They simply didn’t want to pay good money for insurance because that cash could better be spent keeping the fridge stocked with Bud Light. To perpetuate that myth, we even came up with a catchy name for those twenty-somethings — the “young invincibles.”

Our message to America: Don’t feel sorry for those irresponsible bums, and by all means don’t let Congress pass any new laws that would require insurers to cover them.

Having to write that paper was one of the reasons I resigned. As the father of a couple young adults, I knew that their crowd did not consider themselves invincible. They simply did not have money left over after paying student loans and the rent to buy health insurance.

If you think the idea of privatizing Medicare has gone away, that the health insurance industry has thrown in the towel on one of its biggest goals, there was fresh evidence last week that you would be wrong.

As I wrote more than a year ago — when Rep. Paul Ryan (R.-Wis.) unveiled his plan to replace the Medicare system with one that would essentially be run by private insurers — Democrats would be foolish to think that Ryan couldn’t get the public to support the concept.  I noted then that insurers would be investing heavily in efforts to convince people that Ryan’s plan represented the only way to save the Medicare program from insolvency.

One of the tried-and-true tactics insurers have used many times to influence public opinion is the enlistment of “third-party advocates” to disseminate industry talking points. Last week an industry friend in high places — Thomas Scully, who headed the Medicare program during much of the George W. Bush administration — weighed in on the matter. It is only a matter of time, Scully told Kaiser Health News, before politicians on both sides of the aisle endorse Ryan’s proposal of providing Medicare beneficiaries with a set amount of money every year to buy coverage from private insurers.

Scully, now senior counsel at Alston & Bird, the big law and lobbying firm that has represented some of the country’s biggest health insurers, including WellPoint and Cigna, is advocating a gradual phase-in of the Ryan plan, similar to how the recent changes in Social Security came about. 

When members of Congress who led the effort to overhaul the U.S. health care system saw the public option slipping away, some of them suggested that a viable alternative would be the fostering of nonprofit health insurance CO-OPs (Consumer Oriented and Operated Plans) throughout the country.

I was among the many who belittled the idea. Having spent two decades in the health insurance industry, I knew how difficult it is for even the biggest insurers to establish a presence in markets where one or two other insurance firms dominate. And there are hardly any markets left where that is not the case.

The barriers to entry in any given market are so high that the only way insurers have been able to establish much of a foothold where the don’t already have a presence is to acquire one or more existing companies. Aetna became a big player in Philadelphia, for example, only after it bought U.S. Healthcare several years ago.

If you don’t have a sizable membership base, it is difficult to negotiate rates with doctors and hospitals that are as favorable as those that bigger insurers can get. If you have to pay providers more than your competitors, you will have to charge your customers higher premiums. It is almost impossible to grow your membership if you have to price your premiums higher than your competitors. It’s a chicken-and-egg thing and why we have seen such rapid consolidation in the insurance industry. And it’s why I was skeptical that start-up non-profit CO-OPs would have a snowball’s chance.

I’m happy to report that I might have been wrong. In fact, CO-OPs could be one of the sleepers in the health care reform law that truly transforms how care is financed and delivered in this country. And they could even hasten the day when the big investor-owned corporations cede the marketplace to nonprofits and move on to other ways of earning a profit.

I learned that Mitt Romney had won the Nebraska Republican presidential primary last week via a “Breaking News” e-mail alert from POLITICO.  It wasn’t the news from the Cornhusker state, however, that caught my eye. It was instead the health insurance industry’s decision to spend our premium dollars on an Internet ad — an ad warning of dire consequences if the Supreme Court doesn’t rule the way insurers want on the constitutionality of Obamacare.

The worst-case scenario for insurers is if the high court strikes down the provision of the law requiring us to buy coverage (the so-called individual mandate), but allows the law’s important consumer protections to go forward.

The reason Obamacare is built around the individual mandate is because of the relentless lobbying by insurers, and not just on Capitol Hill.  Representatives of the industry made frequent trips to the White House during the debate on reform to twist the arm of President Obama, who had campaigned against the mandate when he was running for president.  

The insurance reps were persuasive in arguing that the parts of the bill consumer advocates were demanding wouldn’t work unless an “enforceable personal purchase requirement” (a.k.a., the individual mandate) was also included, along with subsidies from the government to help low-income families pay their premiums. And not incidentally, insurers love the mandate because it forces millions more people to buy health insurance policies. The insurance folks made it clear that without the mandate and subsidies, the industry would spend whatever was necessary to defeat reform. So a deal was cut. The industry promised it would not try to destroy reform if it got the mandate, and it would even go along with some of what consumer advocates wanted.

We’ll be hearing a lot from politicians this summer and fall about the urgency of dealing with Medicare spending, which will begin to rise sharply in the coming years as increasing numbers of the country’s 75 million baby boomers turn 65.

If we’re fortunate, some courageous candidates will call for renewed debate on a provision of the health care reform bill that had once enjoyed bipartisan support. The one that spineless Democrats decided had to be yanked when a certain former vice presidential nominee claimed, falsely, that it would create government-run “death panels.”

Medicare expenditures now total more than half a trillion dollars annually, representing 15 percent of federal spending.  The only programs to which the government devotes more dollars are Social Security and national defense, both of which consume 20 percent of yearly federal outlays.

The Congressional Budget Office projects that the average annual growth in Medicare spending will be 5.8 percent between 2012 and 2020. It would have been one percentage point higher than that, according to the CBO, if not for the cost-constraining provisions of the Affordable Care Act,  most notably the one that will gradually eliminate the bonuses the government pays private insurers to participate in the Medicare Advantage program.

The Affordable Care Act might have been able to curtail spending further if it hadn’t been for Sarah Palin’s reckless rhetoric. It was Palin who charged that a provision of the law allowing Medicare to pay doctors for having end-of-life discussions with their patients would lead to government-run “death panels.”

You’ve heard it before. Let’s deep six ObamaCare and replace it with a trio of sure-fire free-market solutions to the problems that plague our health care system. All that’s really needed, we’re told, is to pass tort reform, allow insurance companies to sell policies across state lines and encourage people to set up health savings accounts.

Here’s the problem: there is mounting evidence that all three of these strategies not only are ineffective but may actually be making matters worse.

Let’s start with those health saving accounts (HSAs), which folks can establish if they enroll in a high-deductible health plan. With backing from the Bush administration and the insurance industry, Congress passed legislation in 2003 to encourage people to enroll in high-deductible plans by giving tax-exempt status to the money policyholders contribute to their HSAs to cover out-of-pocket expenses. 

Proponents argued that Americans would be more prudent “consumers” and take better care of themselves if they had to spend more of their own hard-earned money for health care and their insurers had to spend less. HSAs, they said, would bring down the cost of care because people with more “skin in the game” would shop around for doctors and hospitals that charged less.

It sounded good. But one of the reasons I left the insurance industry was because of irrefutable evidence that high-deductible plans were great for insurance firms but not so great for many of the people enrolled in them.

The recent news from the nonpartisan Kaiser Family Foundation that health insurers will have to send rebate checks totaling more than $1.3 billion to Americans this summer was especially gratifying to me. It more than justified my decision three years ago to clue members of Congress in on how insurance companies have systematically been devoting ever-increasing portions of our premium dollars to rewarding their shareholders and top executives.

Following my initial testimony in June 2009, Senator Jay Rockefeller (D-W.Va.) and other lawmakers drafted language for the health care reform bill requiring insurance firms to spend at least 80 percent of what we pay in premiums on actual medical care. Despite an intense lobbying effort by insurers, the language emerged unscathed in the final bill. That defeat for the insurance industry is turning out to be a big win for consumers.

One of the reasons I decided to testify in the first place was to explain why Americans are getting far less value for the premiums they pay than they were a few years earlier. As I told members of the Senate Commerce Committee, which Rockefeller chairs, for-profit insurers are under intense pressure from both shareholders and Wall Street financial analysts to show that the portion of their policyholders’ premiums they used to pay claims during the preceding quarter was less than the amount they paid during the same period a year earlier.