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As attacks mount on the piece of health care reform that would make most Americans purchase health insurance or pay a fine, the country's for-profit insurance industry faces a tricky lobbying dilemma.
The so-called "play or pay" provision under fire in Congress and the courts guarantees insurers such as Minnetonka-based UnitedHealth Group millions of healthy new customers. In theory, mandated coverage becomes a lucrative revenue stream that offsets expensive new legal requirements in health care reform.
Now that balance will force the health care industry to try to fend off legal and legislative challenges to health reform, said Ken Gross, a lawyer and lobbying expert in Washington.
It likely means a "deep in the bushes" lobbying effort to quietly change details in the implementation of the health care law, Gross said, because outright repeal won't happen as long as President Obama is in the White House and Democrats control the U.S. Senate.
Wendell Potter, an ex-Cigna insurance executive who has become one of the industry's most vocal critics, calls the situation "sublimely ironic."
"The part of the legislation [insurance companies] value most is under attack by Republicans [the industry] supported," Potter said. "I bet they are meeting with state attorneys general" who brought lawsuits challenging the mandate.
UnitedHealth, the nation's largest health insurer by revenue, won't say how it is lobbying on the mandate issue. A spokesman also declined to answer questions about a published report that said the company is meeting secretly with Aetna, Cigna and other big health insurance firms to develop a public relations strategy designed in part to undo some concessions made in negotiating health care reform.
Those provisions include one introduced by Sen. Al Franken, D-Minn., that forces insurance companies to spend more of each premium dollar on health care instead of marketing and administration. Another part of the new law makes insurance companies cover people with medical conditions that existed before they buy insurance.
Something has to give, Gross said. Health care reform grew from nuanced negotiations and lobbying by hundreds of interested parties. "When the court comes in, " Gross said, "it's not done with a scalpel, but with a sledgehammer."
Federal judges in Virginia and Florida have declared mandated health insurance unconstitutional, while judges in other jurisdictions have upheld its legality. The mandate forms the foundation of all health care reform, which seeks to provide medical benefits to more than 30 million uninsured.
"You can't repeal the individual mandate without undermining the law's other provisions, like the elimination of lifetime caps on insurance, or prohibiting insurance companies from denying coverage because of a preexisting condition," said Franken, who serves on the Senate's Health Education Labor and Pensions Committee.
Most experts believe the U.S. Supreme Court will provide the final answer, one that will help dictate profit margins and premium rates. "At the end of the day, it's a follow-the-money game," said Steve Parente, a health care finance professor at the University of Minnesota.
Overturning the mandate will do nothing to control health care costs, most experts agree. Reform depends on "getting healthy people to sign up," said Wells Fargo analyst Peter Costa, who follows UnitedHealth. "The individual mandate is important to have a better risk pool."
A risk of higher rates
Without a mandate, premium rates that allow UnitedHealth and other for-profits to make money would need to be much higher, Costa said. In New York, he said, the state ordered coverage of existing conditions without mandating that most individuals maintain health insurance coverage. Premium rates doubled, he said.
In Massachusetts, where Costa works, people signed up for health insurance when sick and dropped coverage when they were well.
"There's a consequence" to not making people maintain health coverage, Costa said. "If you take away the mandate, do you then go back on getting insurance companies to issue coverage to everyone? Do you go back on [how much of a premium dollar must be spent on health care]?"
So far, the fallout has not hurt UnitedHealth stock price, which is up about 25 percent in the past six months.
The company issued a single-sentence statement on the court decisions striking down the individual mandate: "As this issue works its way through the courts, we are focused on ensuring that changes in health care are made as effectively as possible for the health of the American people."
Potter, author of the book "Deadly Spin," says his former colleagues spent millions of dollars lobbying for the individual mandate to replace a public option in health care reform because it gave private companies a giant new revenue stream that was in some cases subsidized by taxpayers.
If that mandate goes away, Potter looks for the health insurance industry to go back to legislators and regulators and try to claw back the right to charge people with preexisting conditions so much that they can't afford insurance. He expects a campaign to change the definition of what qualifies as patient care.
Also on the horizon, Potter predicted, is a lobbying push to minimize benefits offered in health reform's standard policy coverage.
Jim Spencer • 612-673-4029