“Et Tu, Ron?”

Aetna CEO Ron WIlliams

A Huffington Post editorial by  , Analyst at the Center for Public Integrity, titled How Obama and the Democrats Got Played by the Insurance Industry on the Mandate was a quite scathing assessment of the role that the Health Insurance Industry played in the making of the Affordable Health Care Act.Potter cites Aetna CEO Ron Williams’ op-ed in the Wall Street Journal titled “Why I No Longer Support the Health Insurance Mandate,” renouncing his support for this key provision of the health care reform law. Not only does he call it a betrayal but questions its timing, as it was published just days before the Supreme Court was expected to rule on the constitutionality of the mandate.

Intensive Lobbying

According to Potter, it was Ron Williams who possibly more than anyone else had persuaded the President to reconsider his campaign pledge to enact reform without making people buy coverage from a private insurer. Candidate Obama, unlike Hillary Clinton and John Edwards had at first said he didn’t believe it was right for people to be forced to buy somethin they couldn’t afford.

Williams was the industry’s most visible CEO on Capitol Hill during the debate on reform, testifying at numerous congressional hearings about how essential it was to move the millions of uninsured Americans into private health insurance plans and how an individual mandate was necessary to make that happen.  He spoke against a “public option” which President Obama had supported to compete with private insurance companies.to compete with private insurance companies.

In an August 2009 article in Forbes, Williams was quoted as saying that he already had met with the President six times. In March of last year Obama appointed Williams to the President’s Management Advisory Board.

Mr. Williams influence is illustrated by Wendell Potter:

I was still head of corporate communications and a member of the public policy team at Cigna when Williams began speaking out about the need for an individual mandate. Many in the industry, including my former CEO, Ed Hanway, were initially skeptical, so Williams set out to convince them he was right. He argued that if Democrats took control of both Congress and the White House, which was looking increasingly likely, they would set their sights on the insurance industry. They most certainly would attempt to ban many of the industry-wide practices that enabled insurers to be so profitable, such as refusing to sell coverage to people with preexisting conditions. If that were to happen, the best way to guarantee that insurers wouldn’t be saddled with just the sickest Americans would be to get the Democrats to agree to a requirement that everybody, including the youngest and healthiest among us, buy private coverage if they weren’t eligible for a public program like Medicare or Medicaid. The government would also have to agree to tax credits or subsidies to help low- and moderate income Americans pay their premiums.

Before long, the CEOs of the other big insurers were indeed on board. They came to realize that if Democrats would agree to an enforceable mandate and premium subsidies, their companies would be getting billions of dollars in new revenue every year — forever. AHIP as a group soon endorsed the mandate, and Williams, who articulated the rationale for it so persuasively, became the industry’s chief emissary to both Congress and the White House.

The Democrats Embrace a Republican Idea

The mandate was in fact a Republican idea, that, in fact, it had been the centerpiece of legislation introduced in both the House and Senate by Republicans as an alternative to Bill and Hillary Clinton’s reform bill back in the early 1990s. Soon after the appointment of Ron Williams to the President’s Management Advisory Board, both the President and Democratic congressional leaders endorsed the mandate, and in a joint address to Congress in September 2009, President Obama said that although the public option was a good idea, it wasn’t essential.

Republicans’ About Face on the Mandate

The GOP leadership’s now famous plan to denounce any reform legislation the Democrats came up with led to their withdrawal of support for their own mandate as they portrayed the ACA as a “government takeover of health care.” They decided to build their legal challenge to the law around the mandate, arguing that it represented an unconstitutional and unprecedented overreach of the federal government.

Why Did Williams Change His Position?

1. Anticipating an Overturn of the Mandate: According to Potter, Williams’ op-ed in the Journal reflected industry leaders nervousness about what the high court will rule, their fear being that the mandate would be struck down whilethe rest of the law would be allowed to stand. That would mean new regulations and consumer protections without the expansion of the market guaranteed by the mandate.  Consequently Williams decided to bet on the Republicans to undo the regulations. He writes:

Williams’ real audience for that op-ed was Republican lawmakers and kingmakers. It was a signal to the GOP that the industry’s brief and often rocky affair with Obama is over and done with, that they were just playing the Democrats all along.

2. The Mandate Has No Teeth: University of Minnesota professor Lawrence Jacobs states that insurers withdrew their support for the bill after learning that the the mandate had no teeth. One concern of the insurance companies is that the law could force insurance companies to extend coverage to tens of millions of uninsured Americans, regardless of pre-existing medical conditions, and, without a mandate, pricing will be difficult, and premium costs could increase.
As I wrote in my post, Health Insurers Rebrand As they Prepare for The Inevitable Reform, pundits like Lawrence O’Donnel on The Last Word, have pointed out that the mandate is not a mandate at all, and that, aside from a small tax penalty of a few hundred dollars, there’s no real enforcement mechanism in it. If the penalty isn’t paid, there are no penalties, civil or criminal. O’Donnell detailed the two ways in which Obama’s law addresses this issue:

“In the section called ‘Waiver of Criminal Penalties,’ it says ‘In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.’” Another key component is the “Limitations on liens and levies.” That reads, “The Secretary shall not file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or levy on any such property with respect to such failure.”

3. Hedging His Bets: It makes sense for Williams to hedge his bets given the difficult position that the Insurance Industry is in in an inevitable climate of change without a mandate. As I explained here without the individual mandate it is very difficult to make universal coverage to work:
One of the important facts of insurance is that people who perceive that they need it less tend not to buy it. The actual fact is, the market has failed to get more young people into the market. The implication of the basic insurance principle of The Law of Large Numbers is that expanding the pool to include healthier participants who are the most likely to opt out of the insurance pool can reduce premiums. This is why the individual mandate is required for universal coverage to work.

The PPACA In Perspective

This reiterates my analysis of the PPACA, what it does and does not do:

The PPACA Model Successfully Expands Coverage: The PPACA, which is based on ex Governor Romney’s Massachusetts model, and in turn, derives from the Swiss model, has been successful in expanding coverage to most people wherever implemented.  In short, it is highly successful in addressing the economic barriers that prevent insurance companies from providing coverage to all individuals.

It is Only The First of a 2-Step Solution: It expands coverage, but it is not a prescription for lowering health care costs.  This must come from reform of the providers who actually drive the costs – the large hospital groups, medical equipment suppliers and pharmaceutical companies.  Piecemeal attempts like Maine’s are flawed from the outset, for this reason, as well as the reason that they are based on the fundamentally disproven premise that age-rated premiums will provide sufficient incentive for the free market to expand the pool of insureds sufficiently to keep premiums low. Such “solutions” overlook the fact that insurers still negotiate service costs with providers who have the market clout to continuously set them higher.

The Next Step: The PPACA is only the first step in a continual process of reform that needs to take place. It addresses the problem of universal coverage, and discrimination issues that arise due to the insurer’s need to address the issue of adverse selection.

The Insurance Industry Is Still the “Good Guy”

What’s now needed is an honest look at the real cost drivers of health care in the United States, and a plan to contain these. In the meantime, in a highly polarized political environment, the providers are still pushing hard against step one, the PPACA in order to continue the status quo. By creating ever expanding number of uninsureds, they stand to gain by opening clinics that provide selective care at lower prices at the expense of the quality of service. And the plan is to derail government’s role in healthcare to create a “wild west” in which health care standards will be further eroded.
 Fortunately, the Supreme Court decision helps prevent vultures like Rick Scott  from introducing a new health care treatment model based on discounted clinics that would lower the standards of care while maximizing profit, a business model that requires an uninsured public to exploit.

Preparing for 120 Million New Customers

Politics is a part of the cost of doing business, but it is now time to put them in the past and get busy  serving a large influx of new customers. In fact, Fred Karutz, the general manager of health plan solutions at Silverlink Communications, a health care technology company, said that if the health care overhaul was left intact by the court, as many as 120 million Americans could be in the market for health insurance by the end of the decade.
With Health Insurers anticipating an influx of new customers due to the Supreme Court’s decision to let the mandate stand, insurers have their work cut out. Already, they are busy expanding their offerings into individual products and rebranding themselves to meet a mass consumer market.
You can see some of the new consumer-based messaging that the major health insurers are now producing here.