It all in her interview with Wendell Potter, who worked for Humana and then was head of corporate communications for CIGNA (the country’s fourth-largest insurer), who left in disgust, and is now a senior fellow on health care at the Center for Media and Democracy.
Trudy Lieberman: Why did you leave CIGNA?
Wendell Potter: I didn’t want to be part of another health insurance industry effort to shape reform that would benefit the industry at the expense of the public.
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TL: What was so upsetting about the industry that pushed you over the edge?
WP: I was in a unique position to know how companies made money—what they had to do to satisfy shareholders—and how the industry has been able to kill reform in the past. I had been part of those efforts and didn’t want to be part of them again.
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WP: Most large insurers are marketing consumer-directed plans. They do research and use selective data to persuade the public that these plans are popular and work as the companies say they do. There’s a lot at stake for these companies. They are building their business models around these plans, so they need to make them succeed. They need to counter research by others that shows many people don’t get the care they need because of the high deductibles that must be met.
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WP: Yes. For one thing, the media has lost interest in writing stories similar to the managed care horror stories they wrote in the 1990s, when insurers and employers were forcing people into HMOs. There is less coverage of the consequences to people resulting from insurance company practices. A lot of critical reporting is just not being done. Most reporters willingly accept a prepared statement that company executives and lawyers have written, and they feel their obligation is over.
WP: They wrote brief stories for investors, but wouldn’t go into the details of the important facts and numbers—such as a company’s medical loss ratio, which tells the percentage of premium dollars that the insurers pay out in claims. This is a closely watched measure by investors and Wall Street analysts, because it tells them how well a for-profit company is meeting investors’ earnings expectations.
TL: Did reporters ever ask about this?
WP: I can’t recall a reporter ever probing how insurers manage to meet Wall Street’s expectations through medical management and claims practices, which are key ways to manipulate the medical loss ratio and dump unprofitable accounts. Not once was I asked by a reporter what happens to people who work for small and mid-sized companies that get "purged" by insurers because their employees’ claims were causing the insurer’s medical loss ratio to move in the wrong direction from an investor’s point of view. No one ever asked me about the human consequences of satisfying Wall Street. Most reporters are happy to do a superficial job.
TL: How do companies manipulate the medical loss ratio?
WP: They look at expensive claims of workers in small businesses who are insured by the company, and the claims of people in the individual market. If an employer-customer has an employee or two who has a chronic illness or needs expensive care, the claims for the employee will likely trigger a review. Common industry practice is to increase premiums so high that when such accounts come up for renewal, the employer has no choice but to reduce benefits, shop for another carrier, or stop offering benefits entirely. More and more have opted for the last alternative.
TL: What tactics do they use in the individual market?
WP: They rescind policies when a review indicates that an individual has filed a lot of expensive claims. They will look for conditions that were not disclosed on the application. Often the policy likely will be canceled and the individual left without coverage. Sometimes people aren’t aware that they have a pre-existing condition. It might be listed in the doctor’s notes but not discussed with the patient.
TL: One way to end this practice might be to regulate it out of existence. Can we count on the industry to submit to more stringent regulation?
WP: The industry says it will accept more regulation, but the evidence is that it flaunts regulation on the books now. Insurers are often cited for violations of many state regulations, and they usually agree to settle with insurance commissioners or the attorney general and pay a fine. Fines are the cost of doing business, and even if the fine is several million dollars, it is inconsequential compared to profits insurers make.
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TL: What can we expect from insurers as this reform discussion continues?
WP: Until there is actual legislative language, we will see the industry continue to be in favor of reform and portray themselves as coming to the table with solutions. They will try to persuade reporters that the industry has changed this time. They are saying the same things now that they said before. A lot of young reporters weren’t around then, and don’t know what they said in ’93-’94.
TL: What can we expect from insurers after the bill language appears?
WP: It’s what we won’t see—what goes on behind the scenes—that will be most important. The industry conducts what I call duplicitous PR campaigns—one of which I refer to as the charm offensive. They talk about how much they are committed to reform. But, behind the scenes, they are financing efforts to kill elements they are opposed to, or they kill reform entirely. They will work through what they refer to as "third-party advocates"—people and groups that are ideologically aligned with them—and use their PR firms and lobbyists to do that work. These surrogates will reach out to radio and TV talk show hosts and conservative editorial writers. Insurers will also activate their grassroots organizations—their employees, businesses, and political allies—and if their ability to make money in the Medicare program is threatened, they will reach out to senior citizens enrolled in their plans. Activities range from sending industry-written letters and e-mails to lawmakers and the media to flying people to Washington to lobby on their behalf. These are called fly-ins.
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WP: We will see front groups formed to attack any legislation or parts of legislation the industry doesn’t like. They’ve done this in past campaigns. They will use front groups to rip legislation to shreds. It’s inevitable that will happen again. It already is. You can be assured that the industry is behind the increasingly vocal opposition to the public plan that would compete with private insurers.
TL: Can you give an example?
WP: The Health Benefits Coalition was formed in the ’90s to fight anti-managed care legislation, including the patients’ bill of rights. It was funded primarily by big insurance companies, but it was portrayed as a broad-based business organization. The industry recruited the NFIB (National Federation of Independent Business) to be the primary spokesperson. Insurers and the NFIB have had a long history of being allies.
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TL: What practices will the industry fight to the death to keep?
WP: They will fight to keep flexibility to design benefits as they see fit; in other words, low-cost policies that don’t cover very much. They will insist on flexibility to continue designing more products that shift the financial burden to consumers. That will enable them to market leaner benefit plans, and it will let them market "voluntary" plans to certain employers that have high employee turnover. These plans don’t require financial participation by employers. Insurers want to have the flexibility to continue designing plans that cover less and move further and further away from the concept of insurance to personal responsibility. Insurers want people to have "more skin in the game," and they want to have less.
TL: What else will they fight strongly for?
WP: They will fight to keep the ability to base rates on age. That will be a way to keep charging the most to people who are likely to be the sickest. That will enable them to offer cheaper policies to younger and healthier people, and that is the market where the competition will be.
TL: If there is an individual mandate, how will the industry benefit?
WP: They have the potential for millions of more health plan enrollees. The ability to have flexible benefit design and base rates on age will allow them to design plans to maximize their profitability.
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TL: How else has the industry strengthened its grip?
WP: Consolidation in the industry into seven dominant carriers makes it more powerful. It has strengthened its grip through mergers and acquisitions. A consequence of this is that, as a few insurers have grown to dominate local markets, doctors and hospitals have organized themselves into powerful conglomerates. As a result, insurers don’t have the bargaining clout they once had with providers and have lost the ability they once claimed to have to control medical costs.
TL: Why is the industry scared of a public plan that would look and act like Medicare?
WP: A public plan could offer the same benefits as a private plan at less costs because it would not have the high administrative costs—which include sales, marketing, and underwriting expenses—associated with most private plans. It would not be under constant pressure from Wall Street to reward shareholders by constantly keeping an eye on the medical loss ratio and earnings per share, another key measure of profitability.
TL: Are the members of Congress who are most vocally against a public plan aligned with the industry?
WP: Yes. One of the things they can exploit is to talk about how a government-run plan would wreck the free market system in health care. Many members of Congress believe the free market can still work with health care.
TL: Can it?
WP: There’s no evidence that it has worked since the Clinton plan failed.
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...The industry knows its image is at an all-time low. So the industry can’t be as obvious in attacking a plan as it was in 1994. They will work through front groups and allies to attack it through ads and commercials.
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TL: How should journalists be covering this middle and last phase of the campaign?
WP: They should be looking at what insurers, drug companies, and organized medicine said during earlier reform efforts, and then report on how well they’ve delivered on those promises. Instead of just reporting costs estimates from the Congressional Budget Office about how much a certain plan will cost taxpayers, which is easy to do, they should write investigative and analytical pieces on the costs to society and the economy if reform is not enacted. Is reform an expense we can’t afford, or an investment we can’t afford not to make? What is the ROI—the return on investment?
