The Health Insurance Companies’ Long Game

America’s health insurance companies seem to believe, along with Republicans, that they can screw up health care reform and get the voters to blame the Democrats for it. Maybe they’re right.

In the most recent issue of the New England Journal of Medicine, Henry Aaron (no, not that one) details the health policy stakes for the midterm:

If ACA opponents gain a majority in either house of Congress, they could not only withhold needed appropriations but also bar the use of whatever funds are appropriated for ACA implementation, including the implementation of the provisions requiring individual people to buy insurance or businesses to offer it. They could bar the use of staff time for designing rules for implementation or for paying subsidies to support the purchase of insurance. They could even bar the DHHS from writing or issuing regulations or engaging in any other federal activity related to the creation of health insurance exchanges, even though the ACA provides funds for the DHHS to make grants to the states to set up those exchanges.


Perhaps the more likely — and in some ways more troubling — possibility is that the effort to repeal the bill will not succeed, but the tactic of crippling implementation will. The nation would then be left with zombie legislation, a program that lives on but works badly, consisting of poorly funded and understaffed state health exchanges that cannot bring needed improvements to the individual and small-group insurance markets, clumsily administered subsidies that lead to needless resentment and confusion, and mandates that are capriciously enforced.

This may be “more troubling” to Aaron, and anyone who is in interested in an efficient and minimally equitable health care system, but the real losers here would be the health insurance companies.  Let’s assume that the GOP Congress puts riders in their appropriations bills forbidding the construction of exchanges or enforcement of the individual mandate.  This means that the insurers will still have to abide by the popular provisions of the ACA: no discrimination against those with pre-existing conditions, no rescissions, no lifetime limits.  (I doubt at this stage that the GOP would ban the enforcement of these provsions.).  Thus, the insurers could not set rates according to health risks or do any of the other things that enrage most people in private plans — but they also would not get the guaranteed new millions of new customers that was supposed to be the compensation for it.  They could, of course, just raise rates on everyone, risking an even further backlash, at this time directed against the GOP, which will be the immediate cause of it.

So you would think that the health insurance industry would be wary about such a scenario.  But no: in fact they are pushing it.  As the Los Angeles Times reported last week, the insurance companies are pouring money into Republican campaigns.

Obviously, the insurers aren’t stupid.  They may think that they can get away with telling the Republicans to maintain the mandate while getting rid of the regulations, but that combination would surely be vetoed by President Obama.  So in the short and medium run, the insurers are taking a risk that the changes in the market brought about by the refusal to set up exchanges or enforce the mandate (which undoubtedly the Obama Administration would refuse to enforce in the absence of exchanges) will not disrupt their bottom line.  (So much for believing their whines about how they need rescission, lifetime limits, and discrimination to make money.).  The ensuing chaos will help elect President Palin in 2012, and create an individual mandate without any regulations against them.

In other words, they seem to believe, along with Republicans, that they can screw up health policy reform and get the voters to blame the Democrats for it.  Maybe they’re right.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

13 thoughts on “The Health Insurance Companies’ Long Game”

  1. Interesting. Would a mandate without regulations have some of the same effects in terms at least of lowering costs, possibly pushing some people from the "NO, you do not get insurance," to "Well, we might as well take the risk on you" pile?

  2. The logic of the post is impeccable. But it assumes that the insurers are as logical as the author. They are not. First, insurers are the doofuses of the financial services industry. Except for old AIG, the smart guys avoid working for insurers, except maybe as actuaries and lawyers. Second, you can't underestimate the tribalism of big bidness. They'll fund the Republicans even against their own interests.

  3. You're missing the point. A GOP-controlled Congress will pass any crazy, self-contradictory thing it wants because they know Obama will veto it. Then, they'll use it as a campaign issue in 2012. The substance does not matter. Olny the marketing/optics/30-second ads do. It must be truly liberating not to care at all about policy and the government's responsibility to the electorate.

  4. I actually find this quite hopeful. Someone has to destroy the health insurance companies, before health care can be effectively reformed. Who better to do the necessary, than the health insurance companies and the Republican Tea Party?

  5. This assumes, of course, that there's money and will to enforce the more popular provisions. In a GOP dsytopia, it would be easy to foresee (as, say, with the extractive industries) a situation where laws forbidding rescission, benefit caps, pre-existing condition exclusions and so forth are on the books, but are dead letters in practice.

  6. "They could, of course, just raise rates on everyone, risking an even further backlash, at this time directed against the GOP, which will be the immediate cause of it."

    Uh, no. The backlash will be against the Democrats. Because it always is. The public will be told that Democrats passed a law and that their rates rose as a result.

  7. What Anderson said. Dems are pathologically incapable of refuting anything Conserves say, up to and including 'the sky is green'.

  8. The insurers are well aware that without reform they are arranging deck chairs on the Titanic. However, you heard it here first, okay? The MAIN objection insurers have at this point to reform is in the technical details not involving the exchanges or the mandate, but some other provisions. Their main goal will be to try to get regulatory relief, and yes, they would like to get legislative relief failing that. Beyond that, I see the Republcan project at this point as being so reactionary and stupid that it's hard to predict what would really happen.

  9. The Titanic, as you may recall, did not have enough lifeboats to accomodate all of its passengers.

    The appropriate metaphor might be to imagine the White Star Line charging passengers an additional fee to use the lifeboats, while refusing to refund the fare for the incomplete trip to New York. And, then protesting against any regulation that the lifeboats be sea-worthy. And, haggling with the Carpathia over charges for picking up lifeboat passengers.

    I think that the health insurance companies own the iceberg in this scenario, and regard the sinking of the Health Care Titanic as a desirable feature, rather than a bug. In a system, which is already fantastically expensive, their main and controlling desideratum is a bigger percentage off the top.

  10. Bruce, my point is that, increasingly, insurers are sucking air in the commercial insurance market and finding the market getting smaller, not larger. A greater and greater share of profits and business come through government programs.

    But I'm not going to get into an extended discussion, because, basically, what I usually get back are "meta" views like those you express, with no detailed understanding of actual provisions or practices, much less extraordinary regional variations.

  11. Their main goal will be to try to get regulatory relief

    Good point, Barbara. How the regs are written will make all the difference, and it will really matter who is running HHS/CMS.

  12. I watched a similar discussion on public TV to Barbara's – can't remember where – and the host was aghast by the end. It reinforced my suspicion that the insurance industry gamed the system to their advantage, like the carbon industry did to cap & trade, yet killed it…hmmm…

    Nonetheless, having worked for two large corporations, I no longer have the notion that corporations or an industry "isn't stupid". I've been on the inside. I used to wonder how anything got done.

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