Savvy game plan puts insurers near their goal

WASHINGTON — As President Obama's push for a health-care overhaul moves toward its final act, the oft-vilified health-insurance industry is on the verge of seeing a plan enacted that largely protects its financial interests.

That achievement, should it survive final legislation, would be the capstone of a sophisticated lobbying and strategic campaign that began even before Obama was elected president.

The specifics of the legislation are still being hashed out on Capitol Hill, and key details will evolve in the days ahead. Even so, there is broad agreement the final plan will require Americans to buy health coverage for the first time, with taxpayer subsidies for millions who cannot afford it.

For the insurance industry, that means millions of new paying customers. What's more, there are likely to be no limits on what insurers can charge, while at the same time the plan is expected to limit competition from any new national government-insurance plan lawmakers create.

These anticipated wins — from an initiative that has at times been portrayed as doomsday for health insurers — is the result of a strategy developed by one of Washington's savviest lobbyists, Karen Ignagni.

Dual goals

Under her leadership, the industry group America's Health Insurance Plans adopted the goal of universal coverage while setting out to shape it in a way that benefited insurers, a critical move that aligned their interests with those of other groups, including consumers and hospitals.

Insurers poured campaign donations into the coffers of key sympathetic members in the House and Senate, and loaded up on lobbyists.

And when Obama and other Democrats began attacking the industry, insurers made a strategic choice not to walk away from the negotiating table.

"While so many in this town have been playing checkers, Karen has been playing chess," said Mark Merritt, a veteran lobbyist who heads the Pharmaceutical Care Management Association.

In broad terms, the legislation is expected to require all Americans to purchase health insurance.

Insurers, in turn, would be barred from canceling policies of sick people or denying coverage to those with pre-existing conditions.

What's still not clear is whether the legislation would lead to a "public option," or government-insurance program, which insurers steadfastly oppose.

In addition to fighting the public option, insurers that offer Medicare HMOs are battling more than $100 billion in cuts in federal payments to that program.

And they are trying to beat back a move by Democrats to go after the industry's decades-old exemption from antitrust law.

But in Washington, many marvel that lawmakers have not wrung more from an industry that surveys show is held in low regard by the public.

"The industry is really in no position to be making demands," said longtime Democratic pollster Celinda Lake.

It's not by accident.

For much of the last three years, industry leaders have been laying the groundwork for this battle.

Amid horror stories about insurers dumping sick patients, denying coverage for medical treatment and cherry-picking customers, Ignagni and a few insurance executives pushed the idea within America's Health Insurance Plans that the industry risked political catastrophe if it did not move proactively.

PR problem

"They knew they had a very big (public-relations) problem, and they knew this day was coming," said Wendell Potter, a Cigna public-relations executive who quit last year. "They knew they had to be perceived as coming to the table with solutions," he said. "It was a departure from their previous point of view. But they knew they would be slaughtered if it weren't."

The first public sign of the shifting stance came in November 2006, when the trade group came out in favor of universal coverage with its Roadmap for Reform.

That built on the breakthrough idea, propelled early on by Blue Shield of California's Bruce Bodaken and Kaiser Permanente's George Halvorson, that universal coverage was key to the future of the industry.

It was a 180-degree turn for insurers, long content to compete against one another to cover the healthiest consumers and to avoid those with pre-existing conditions and high medical costs.

It was also a significant departure for an industry that in the early 1990s orchestrated the defeat of the Clinton administration's push for broader coverage.

"They decided that they had a responsibility to contribute to the process and to bring real and substantial reforms to the table," Ignagni said.

America's Health Insurance Plans followed up with more overtures, endorsing new rules that would prohibit insurers from denying coverage.

The move paid dividends, as insurance executives were invited to the table when senior Democrats in Congress began developing legislation earlier this year. The executives became familiar figures in the committee rooms on Capitol Hill, testifying in favor of an overhaul.

Ignagni also went to the White House to consult with senior officials there. She publicly offered the industry's help in reining in the nation's growing health-care tab, providing Obama with a public-relations coup when the White House wanted to show momentum behind its health-care campaign.

"I don't know of any other industry that has committed to a massive overhaul of the way their market works," Ignagni said, firmly rejecting allegations that insurers have simply been trying to manipulate the legislative process.

Lobbying tactic

As the legislation developed, industry lobbyists papered congressional offices with studies and reports to head off proposals it feared, a tactic often used by the industry.

America's Health Insurance Plans used hospital data from California to warn that hospitals and other providers would suffer from a new government-insurance plan.

More recently, insurers pushed Democrats to toughen the requirement that all Americans get insurance, going to Capitol Hill with internal industry studies that purported to show premiums would skyrocket if more people did not get coverage.

The full-court press coincided with generous campaign donations to conservative Democrats, including Senate Finance Chairman Max Baucus, D-Mont., who will be key to passing health-care legislation later this year.

Members of the House "Blue Dog" coalition have received nearly $3 million from the industry since 2006, according to data compiled by the nonprofit Center for Responsive Politics.

In the Senate, Democrats Ben Nelson of Nebraska and Evan Bayh of Indiana, two conservatives who have expressed skepticism about a new government-insurance plan, each has received more than $470,000 from the industry since 2006.

As the industry's initiatives have gained steam, Obama and Democratic congressional leaders have stepped up their counterattacks, a strategy that appears aimed partly at keeping sympathetic lawmakers and constituents on board.

Industry setback

And this month, Baucus' finance panel dealt the industry a blow in its bill by weakening the penalties on Americans who fail to buy insurance.

The industry insists that if penalties aren't tough enough, many young and healthy people will forgo coverage, saddling insurers with a disproportionate number of older people likely to incur higher medical costs.

"The health plans have never been in as much political peril," Sheryl Skolnick, a health-care analyst with Pali Capital Research, said, explaining worries on Wall Street about how the industry will fare.

But even as the president and others on Capitol Hill lambaste insurers, lawmakers are working to accommodate the industry's concerns.

Senior Democrats are exploring ways to ensure more people buy coverage.

"We are wrestling with this concept of how we get everybody in," Baucus said.