Last May executives from UnitedHealth Group, America's biggest health insurer, hosted a luncheon in Washington, D.C., to describe how they could save the government billions of dollars in medical spending. Two months later they were back in the nation's capital, rolling out a plan to serve rural patients using "telemedicine." The same week, they opened a center to study the effectiveness of competing medical treatments.

There's a reason they've made Washington their second home. As Congress grapples with a sweeping overhaul of American health care, private insurers such as Minnetonka-based UnitedHealth are scrambling to present themselves as part of the solution, not the problem.

If they succeed, insurance companies could earn an even bigger role in shaping the way Americans get medical care and pay for it. If they fail, they could find themselves elbowed aside as players in the nation's health care system.

In the debate over health reform, someone will always argue that everything a private insurance company does "can be done more effectively and cheaply on a consolidated basis,'' said Michael Scandrett, who leads the health policy practice of Halleland Health Consulting in Minneapolis.

"This raises the question: What is their role in the new system?" Scandrett said.

At the urging of President Obama, Congress is writing legislation that would expand health coverage to most Americans. But it could also include a public insurance option to, as Obama puts it, "keep the insurance companies honest.''

The opportunity for private insurers is huge: 45 million new customers -- the currently uninsured. UnitedHealth, which already serves 70 million Americans, could capture a big share.

But the threat is big as well: A public plan could snap up many of the new customers, and maybe steal some existing customers too.

Stephen Hemsley, the CEO of UnitedHealth, is not intimidated. "Leading companies take advantage of disruptive change in the marketplace," he told reporters recently. "Our shareholders will prosper."

They have for years. Under longtime chief executive William McGuire, who left in 2006 amid a stock-options scandal, UnitedHealth diversified rapidly and found one new profit opportunity after another.

In the old days, insurers simply collected premiums, negotiated contracts with doctors and hospitals, and paid bills.

Today, actually insuring health risk makes up less than half of UnitedHealth's earnings, $3 billion last year. The rest comes from managing benefits for large employers, administering public programs such as Medicare and Medicaid, and selling various technology and data services.

Serious competition

With a grip on almost every aspect of health care, UnitedHealth and a handful of other big insurers have become juggernauts -- simultaneously loved by Wall Street and despised by critics who see them as unnecessary middlemen.

Some members of Congress, doctors and consumer advocates think the country should simply get rid of private insurers and go to a single-payer system, often dubbed Medicare-for-all.

They gained a surprise ally last month when an insurance insider turned critic, Wendell Potter, a former executive with CIGNA Corp., told a Senate committee that insurers "confuse their customers and dump the sick, all so they can satisfy their investors."

In an interview last week, Potter said he doubts that a public plan would put private insurers out of business. But he does think it would create serious competition because it would have lower operating costs and could offer lower premiums. A public plan wouldn't have to generate profits for shareholders, spend money on marketing or pay executives large salaries. That's why, he said, insurers are "pulling out all the stops to keep a public health plan from being made into law."

On the other side stand lawmakers who favor private industry and polls showing that many Americans worry about keeping their private plans.

"If you take them out of the loop, somebody has to take that place," said William Bluhm, a Minneapolis-based principal with Milliman, a large actuarial firm. (UnitedHealth is a client.) "It seems unlikely to me that government employees have secret knowledge that the industry doesn't have on how to provide care."


Enter Simon Stevens, UnitedHealth's point person on reform and a former health adviser to ex-British Prime Minister Tony Blair.

Stevens argues that a big public program paying below-market rates, like Medicare, would simply prompt doctors and hospitals to shift costs to the privately insured. It would be "unsustainable," he said.

But because UnitedHealth isn't just a health insurer anymore, Stevens has other cards to play. The company has vast experience processing claims, evaluating care and providing other administrative functions, and thus could help reshape care delivery.

For example: President Obama often praises integrated systems such as the Mayo Clinic as examples of efficient, coordinated care. For the non-Mayos of the world, Stevens said, UnitedHealth could offer "virtual ways of integration," by offering nursing, technological and billing support.

Michael Scandrett agrees -- to a point.

Private insurers "brought accountability. They brought data. They brought evidence-based practices. They did start educating patients. These were all valuable additions," he said. What they've failed to do, he added, is meaningfully stem rising costs.

So why hasn't UnitedHealth, with its immense market reach, reduced health care costs for its own members?

Stevens says it has, for large employers who use the company's "full tool kit of care management." Their costs have risen about 4 percent a year, compared to the U.S. average of 7 to 8 percent, he said.

However, he said, the impact has been blunted by consolidation among health providers, which can sometimes command higher prices.

An overhaul of health care could give the insurers a new opening for their techniques.

"Senior administration officials [and] congressional leaders are keenly interested in our ideas,'' Hemsley told reporters recently. "If you really believe in controlling costs, it requires innovation. That's not a natural capacity of government.''

A news conference disrupted

The many forces at play in this debate -- including high-level lobbying and public outrage -- collided one recent morning in Washington.

The occasion was the July launch of UnitedHealth's telemedicine venture. The company had parked a mobile telemedicine truck at the steps of the Capitol for lawmakers to tour. An employee sitting in the truck played the role of a patient, describing her symptoms via video to a doctor at UnitedHealth's headquarters in Minnesota. The doctor, called in specially from Park Nicollet Clinic for the demonstration, listened and gave instructions to a nurse.

Meanwhile, at the Capitol, a protester had disrupted the open-air news conference, yelling: "Why do you oppose single payer? You oppose single payer because it would wipe out the health insurance industry!"

He kept yelling until he was removed by security.

Chen May Yee • 612-673-7434