Politics & Policy

Insurance Racket

The president needs insurers, and also needs to blame them. Will the relationship survive?

Insurance-company CEOs met with President Obama at the White House on Friday for what presumably was an awkward conversation about the latest wrinkle in their close four-year relationship.

The administrative “fix” to Obamacare is less a substantive policy solution than an effort to shift public outrage over the president’s “incorrect promise” away from vulnerable Democrats and onto the very insurance companies whose cooperation is vital to the law’s success.

The next several weeks will provide a key test for a complicated relationship dating back to 2009, when the health-insurance industry became an early backer of the Obama administration’s reform effort — somewhat ironically, given the relentless public flogging they received in that fight from the president and his Democratic allies.

But by coming to the table and playing nice — and spending millions of dollars to lobby lawmakers — the insurance industry managed to secure a fairly lucrative arrangement. Millions of Americans would be compelled by law to purchase their products. The federal government would pony up almost half a trillion dollars of taxpayer money to subsidize the purchase of health insurance, which will go straight into insurers’ pockets. On top of that, if the law worked, many of those government-mandated customers would be ideal clients — young, healthy people unlikely to require expensive care and insurance-company payments.

“Their interests are aligned with our interests in terms of wanting to enroll targeted populations,” a senior White House official told Politico last week. “It is not that we will agree with everything now either, but I would say for some time now there has been a collaboration because of that mutual interest.”

Earlier this year, it was revealed that Health and Human Services secretary Kathleen Sebelius may have sought to exploit this symbiotic relationship by illegally soliciting donations from insurance companies for Enroll America, a 501(c)(3) nonprofit group dedicated to maximizing Obamacare enrollment.

The law’s disastrous rollout, however, is beginning to strain this tentative alliance. The president himself has thus far refrained from directly attacking the insurance industry, but the initial White House response to the uproar over mass policy cancellations — something Obama repeatedly pledged wouldn’t happen to anyone — was to insist that Obamacare had nothing to do with it, implicitly faulting the insurance companies that canceled the policies (to comply with Obamacare).

Following the president’s announcement on Thursday, the insurance industry fired back. “The only reason consumers are getting notices about their current coverage changing is because the ACA requires all policies to cover a broad range of benefits that go beyond what many people choose to purchase today,” Karen Ignagni, president of America’s Health Insurance Plans, said in a statement issued during the president’s news conference. “Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers.”

The Obama administration can hardly afford to further alienate the insurance industry. Its cooperation and participation in the exchanges is required if the law has any chance of success. At the same time, insurance companies need a fully functioning exchange so that people can actually enroll in and pay for policies.

Some state insurance regulators have already refused to play along with Obama’s latest “fix,” the legality of which is questionable at best, and will not allow insurance companies to continue to offer health plans that were canceled for non-compliance. Congress may well provide a more formal and expansive fix to the problem, but there remain a host of pressing issues that are likely to further test the industry’s relationship with the White House.

Insurance companies are already lobbying furiously to reduce the impact of nearly $200 billion worth of cuts to Medicare Advantage, the system of privately administered Medicare plans approved by the federal government. After being delayed until after the 2012 election, the cuts are scheduled to go into effect next year. The industry is also facing more than $100 billion in new taxes on insurance plans beginning next year, which will almost certainly cause premiums to rise even further, especially if enrollment in the exchanges remains low and consists largely of older, sicker individuals. The White House will no doubt be tempted to blame insurance companies for any significant increase in the price of health plans, regardless of the cause.

But even if the exchanges don’t live up to expectations, insurance companies will receive a partial bailout for losses over the next three years, thanks to a little-noticed (but extensively lobbied for, no doubt) provision in the law that Senator Marco Rubio (R., Fla.) is now trying to repeal, after noting that the president’s latest fix will only increase the likelihood of a taxpayer bailout.

A vote on Rubio’s plan would put Democrats and the White House in the politically dicey situation of defending the insurance companies’ right to a bailout, or of inciting their wrath in such a way that it could finally blow up a relationship crucial to Obamacare as we know it.

— Andrew Stiles is a political reporter for National Review Online.

Andrew StilesAndrew Stiles is a political reporter for National Review Online. He previously worked at the Washington Free Beacon, and was an intern at The Hill newspaper. Stiles is a 2009 ...


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