Obama Takes on Insurance Companies in Healthcare Push

Inside the Ritz-Carlton ballroom, underneath golden chandeliers, the health insurance industry was trying not to be distracted by what was happening outside. This was last Tuesday in Washington, where America's Health Insurance Plans, the industry trade group, was holding its annual policy meeting, a series of talks about the state of the industry.

Corporate meetings at the Ritz—with its plush carpeting, marble bathrooms, and omnipresent door-holders—make an appealing target for protesters, and healthcare reform advocates weren't going to let this one slip. Around noon that day, an estimated 5,000 people gathered at the hotel's front entrance after shuffling through the streets of D.C. and amassed before a police barricade to protest the industry's practices and urge Congress to pass healthcare reform.

It was a tightly scripted event, organized by unions and activist groups, with people bused in from around the country, yet in some ways the anger was just as palpable as that at last summer's town hall protests. There were handmade signs, there was chanting, there were people decrying corporate greed. Whether it's the federal government or the insurance industry, protesters have found their villains.

For much of the past year, the insurance industry has gone along with many of the Democrats' proposed reforms on the grounds that it will get tens of millions of new customers in return if health coverage becomes nearly universal. But in recent weeks, the industry has become public enemy No. 1 for the White House, which is trying to boost its case for reform by highlighting reports of proposed premium hikes around the country. In Connecticut, rates may rise more than 20 percent for some people later this year. In Illinois, the state insurance commissioner has predicted as much as a 60 percent increase. And as President Obama told a crowd last week in Glenside, Pa., "Just last month, Anthem Blue Cross in California tried to jack up rates by nearly 40 percent—40 percent. Anybody's paycheck gone up 40 percent?"

Politically, this latest salvo may do exactly what the administration wants: help House Speaker Nancy Pelosi firm up support in her caucus to pass the Senate's healthcare bill, along with a set of tweaks. The White House has called for the vote this week, setting up a climactic next few days. But it also tiptoes around an important question: Why, exactly, are premium rates going up so dramatically?

The White House, pointing to a new Goldman Sachs analysis, is blasting insurers, saying that the lack of competition and regulation allows them to raise rates without fear of losing customers. Even if customers do leave, insurers don't care, because they're already making enough money from the people they have, the White House says. "They will keep on doing this for as long as they can get away with it," Obama told the crowd in Pennsylvania. "They're telling their investors this: We are in the money; we are going to keep on making big profits even though a lot of folks are going to be put under hardship."

But inside the Ritz-Carlton last week, the industry had a different take. "Unfortunately, the path that has been followed is one of vilification rather than problem solving," said Karen Ignagni, president of AHIP. The industry isn't to blame for rising premiums, she argued; it's the healthcare providers who are raising rates for the serv­ices and products. "No one in this town wants to face" the underlying problems, she said. "Leading policymakers are focusing on the end of the chain"—meaning the final price tag, not the source of the cost.

The industry argues, for example, that differences in how doctors practice lead to $260 billion in "inefficiencies," or waste, every year. Many doctors and hospitals, of course, say the blame lies with the legal system, for forcing them to do extra tests to protect against lawsuits; with the government, for paying them too little to see patients on Medicare and Medicaid; and with insurers, for not paying them to help patients make healthful lifestyle choices.

The result is a nasty game of finger-pointing. In the short run, it may be a good strategy for the White House to get the bill passed. But the bigger question is what happens after that. Will it actually make healthcare cheaper? The Senate bill has an array of pilot programs to test new ways of paying doctors and hospitals, including incentives to encourage doctors to share information with one another about the same patient. If the programs work and are applied nationally, they could lower the cost of healthcare, and in turn lower premiums. Some say, however, that the bill pays only lip service to these changes and focuses instead on expanding insurance. "Healthcare reform became health insurance reform long ago," said Gail Wilensky, a former chair of the Medicare Payment Advisory Commission. But others say it's a start. "It's not worth killing the bill because we're not as aggressive as some of us would like," Ken Thorpe, chair of the health policy department at Emory University, said. "At the end of the day, what's in this is moving in the right direction."