As momentum gains for reforms, insurers hope to turn it to their advantage by supporting a proposal that everyone buy coverage. It would be a boost for the industry, which has seen enrollment decline.
may find it hard to believe that the U.S. health insurance industry
supports making major changes to the nation’s healthcare system.
industry, after all, scuttled President Clinton’s healthcare overhaul
bid with ads featuring "Harry and Louise" fretting about change.
But this time, it turns out, the health insurance industry has good reason to support at least some change: It needs it.
Private health insurance faces a bleak future if the proposal they
champion most vigorously — a requirement that everyone buy medical
coverage — is not adopted.
The customer base for private
insurance has slipped since 2000, when soaring premiums began driving
people out. The recession has accelerated the problem. But even after
the economy recovers, the downward spiral is expected to continue for
years as baby boomers become eligible for Medicare — and stop buying
Insurers do not embrace all of the healthcare
restructuring proposals. But they are fighting hard for a purchase
requirement, sweetened with taxpayer-funded subsidies for customers who
can’t afford it, and enforced with fines.
Such a so-called
individual mandate amounts to a huge booster shot for health insurers,
which would serve up millions of new customers almost overnight.
think that’s why we’ve seen the industry basically trying to play the
administration’s game," said Jane DuBose, an analyst with industry
tracking firm HealthLeaders-InterStudy. "They really could be licking
their chops over the potential here."
The industry says its interest in change flows not from narrow self-interest but from broader concerns.
driving this is we have 47 million people who don’t have access to the
system, who get help through emergency rooms, and that results in
higher costs and inefficient care," said Robert Zirkelbach, a spokesman
for industry trade group America’s Health Insurance Plans. "There’s
both a social and economic reason to get everybody in the healthcare
Jay Gellert, chief executive of Woodland Hills-based
Health Net, said industry support for certain changes is driven by "a
recognition that public frustration with many of the problems in the
system [is] increasing pretty significantly. So I think there’s as much
of a commitment to this because we’ve seen other industries where they
haven’t dealt with issues early enough, like financial services and
auto, and that’s not a happy place."
Still, industry observers
say, private insurers need the government’s help to transform some of
the nation’s 45 million uninsured residents into paying customers.
insurers lost an estimated 9 million customers between 2000 and 2007.
In many cases, people lost coverage because they or their employers
could no longer afford it as premium increases outpaced wage growth and
Recession job losses are adding to the toll. Some
economists estimate that every percentage-point increase in the jobless
rate adds 1 million people to the ranks of the uninsured.
industry’s real trouble begins in 2011, when 79 million baby boomers
begin turning 65. Health insurers stand to lose a huge slice of their
commercially insured enrollment (estimated at 162 million to 172
million people) over the next two decades to Medicare, the
government-funded health insurance program for seniors.
rate of aging far and away exceeds the birth rate," said Sheryl
Skolnick, a CRT Capital Group healthcare investment analyst. "That’s
got to be very scary. . . . This is the biggest fight for survival
managed care has ever faced, at least since they went bankrupt in the
With Democrats in power and public sentiment in
favor of change, the industry can’t afford to flatly oppose it, said
Julius Hobson, a Washington lobbyist for hospitals and insurers with
the law firm Bryan Cave.
"This time, you get the sense
something is going to happen," he said. "So to stand up and just say no
is probably not wise, because politically you could get run over."
insurers, getting "run over" would be the adoption of a so-called
single-payer plan, in which the government pays all medical bills. Such
a plan, though widely viewed as politically unfeasible this year, would
wreak havoc on the private insurance market.
The best way for
the industry to preserve the private insurance market — and derail the
campaign for a single-payer system — may be to go along with more
palatable proposals on the table now, said Jeffrey Miles, a healthcare
analyst and president of the Miles Organization, a Los Angeles
insurance brokerage firm.
"If healthcare goes down this year, you are going to end up with single-payer care much sooner than anyone expected," he said.
there is a limit to how much change the industry will abide. It draws
the line at proposals, supported by President Obama and others, to
offer consumers a public insurance alternative to private coverage.
idea is that consumers could buy into a government-run health plan,
such as or similar to Medicare or the federal employees insurance
Proponents say that if consumers are required to buy coverage, it is only fair to give them a public option.
In a recent letter to Senate Finance Committee Chairman Max Baucus
(D-Mont.), for example, Jerry Flanagan of the Santa Monica-based
advocacy group Consumer Watchdog wrote that adopting an individual
mandate without a public alternative would amount to "a bailout for
HMOs — whose greed, waste and indifference to our health have created
the current mess."
The industry fears that the government would
force lower fees on hospitals and physicians, enabling a public health
insurance plan to offer consumers a better bargain.
say, would make it hard for private companies to compete for customers.
Insurers also fear that a public option could easily be converted later
into a single-payer healthcare system.
Health insurers don’t
see a public plan "as the nose of the camel under the tent; they see it
as the front half of the camel under the tent," said Robert Laszewski,
a former insurance company executive and industry consultant.
are interested in 45 million new customers," he said, "but the first
thing in everybody’s mind is preserving their right to do business in a
way that can be profitable and meet shareholder needs."