The Insurance Straw Man

Oct 11, 2010

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Health and Human Services Secretary Kathleen Sebelius has taken exception to a Wall Street Journal editorial that attacked her recent actions as secretary. According to Secretary Sebelius, the Journal's criticism of her was really just one move in a larger effort orchestrated by the insurance industry to slow down her efforts to implement the new health care law. In her rebuttal, the secretary made it clear that she will not change course because, in her view, all she has been doing is providing long overdue oversight to a renegade industry that regularly runs roughshod over consumers.

It’s clear the secretary believes the best defense is a good offense, and the insurance industry makes for a good target. But her rebuttal doesn’t actually address the substance of the recent criticism. The Wall Street Journal editorial to which she was notionally responding did not fault her for faithfully executing what is required by statute — though it’s certainly the case that the Journal’'s editorialists are among the new law’s staunchest critics. No, the Journal took her to task for abusing the power of her office for political purposes. And they were absolutely right to do so.

On Sept. 9, the secretary sent a letter to the trade group representing the nation’s health insurers expressing her displeasure with stories in the press that quoted insurers that blame a portion of their looming premium increases on the mandates in the new health law. Of course, it’s hardly breaking news that new insurance coverage requirements raise premiums, and sometimes substantially depending on the circumstances and market. Nonetheless, this kind of truth-telling in public was too much for the administration, which has been asserting, without any supporting evidence, that the new law would actually lower premiums for those with existing coverage.

And so, to apparently show how serious she is about getting the industry to toe the line, the secretary’s letter issued a plainly stated threat: Any insurer that dared to utter the truth about why premiums are rising might be banned from the government-managed "exchanges" through which the administration hopes most individual and small-group purchasers of insurance will eventually get their coverage. For many insurers, if the law gets implemented as planned, banishment from these exchanges could very well mean going out of business.

Washington sees more than its share of power plays, and there were many on display during the year-long health care debate. But even by Washington standards, the secretary’s letter is highly unusual, and startling. It is not every day that a cabinet secretary issues a threat aimed at controlling the speech of an entire industry for plainly political reasons.

But it does fit a pattern. For more than a year, the administration has sought to frame the health care debate as primarily a fight between advocates for consumers and the private health insurance industry, and Secretary Sebelius has been leading the way in this regard. Last summer, the president started calling the legislative effort "health insurance reform" and downplayed the arguments he had previously been using to sell his reform vision, such as "bending the cost curve" and universal coverage. In the weeks before final passage, Secretary Sebelius pounded Wellpoint for requesting a large premium increase for a segment of its market in California, arguing that the increase was unjustified and could be addressed with the new oversight provided in the law.

In recent weeks, both the president and the secretary have focused their public remarks almost exclusively on what the new law will supposedly do to help people with pre-existing conditions get and keep coverage as well as other mandated coverage requirements. Indeed, both have dared opponents of the new law to try and roll back the insurance requirements that have gone into effect this year.

It is no doubt useful politically for the administration to set up the private health insurance industry as its foil in this struggle. Many Americans have low regard for insurance companies. But this is largely a diversionary tactic on the part of the secretary. She wants to leave the misimpression that what the health care bill is really about is the relatively minor coverage requirements being imposed this year, not the much less popular provisions of the new law, such as the nearly $700 billion tax increase it imposes over the next 10 years. Or the long-term budgetary costs associated with adding 30 to 40 million people to federal health entitlement programs. Or the 7.4 million seniors who will lose access to the Medicare Advantage plan they would have preferred. Or the large numbers of employers who are likely to drop their existing coverage arrangements in favor of putting their workers into the exchanges. These are the major provisions of the new law, changes that will impose new costs on tens of millions of Americans — and they are the main reasons why the law remains highly unpopular with a very large segment of the electorate.

Of course, the insurance issue that most animates public concern is pre-existing conditions. In 1996, Congress banned preexisting condition exclusions for those who stay in continuous coverage, but the rules, while far-reaching, have left a few holes. Consequently, a not-insignificant number of Americans with existing and expensive health conditions still have great difficulty securing affordable and stable coverage. The public rightly wants this fixed.

Ironically, the president and the secretary have now embraced a remedy for this problem — high-risk pools — that has strong bipartisan support. In 2008, then-presidential candidate John McCain proposed robust high-risk pool funding as a way to cover all of the uninsured with expensive pre-existing conditions. At that time, the Obama campaign attacked the concept as an inadequate half-measure. Now, however, the president is touting the coverage being provided through the modest high-risk pool funding as a primary argument against repeal.

In their recently issued campaign program, House Republicans also endorsed high-risk pool funding as a way to cover preexisting conditions. This should make it abundantly clear to the electorate that it is entirely possible to fix problems in private health insurance without embracing the rest of the president’s sweeping and government-centric health agenda.