Interview with a former health insurance company exec

Interview with a former health insurance company exec
Full interview at Columbia Journalism Review

(Trudy Lieberman = interviewer; WP = Wendell Porter, former CIGNA head of corporate communications)

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.

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.

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.

TL: Why is the industry so powerful?

WP: Over the many years, their PACs and individual executives have contributed to many political campaigns. They’ve hired former members of Congress as lobbyists, such as my former colleague Bill Hoagland, who was a top aide for Senate majority leader Bill Frist and now heads CIGNA’s government relations operation. All the companies have independent lobbying firms working for them. Some are close to Democrats and some are close to Republicans.

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.