[Marxism] Health Law Turns Obama and Insurers Into Allies
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Mon Nov 17 12:48:24 MST 2014
NY Times, Nov. 17 2014
Health Law Turns Obama and Insurers Into Allies
By ROBERT PEAR
WASHINGTON — With the health insurance marketplace now open for a second
year, President Obama will be depending more than ever on the insurance
companies that five years ago he accused of padding profits and
canceling coverage for the sick.
Those same insurers have long viewed government as an unreliable
business partner that imposed taxes, fees and countless regulations and
had the power to cut payment rates and cap profit margins.
But since the Affordable Care Act was enacted in 2010, the relationship
between the Obama administration and insurers has evolved into a
powerful, mutually beneficial partnership that has been a boon to the
nation’s largest private health plans and led to a profitable surge in
their Medicaid enrollment.
Reaching businesses like Bagel Grove in Utica, N.Y., is a priority for
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The insurers in turn have provided crucial support to Mr. Obama in court
battles over the health care law, including a case now before the
Supreme Court challenging the federal subsidies paid to insurance
companies on behalf of low- and moderate-income consumers. Last fall, a
unit of one of the nation’s largest insurers, UnitedHealth Group, helped
the administration repair the HealthCare.gov website after it crashed in
the opening days of enrollment.
“Insurers and the government have developed a symbiotic relationship,
nurtured by tens of billions of dollars that flow from the federal
Treasury to insurers each year,” said Michael F. Cannon, director of
health policy studies at the libertarian Cato Institute.
The relationship is expected only to deepen as the two sides grow more
“These companies all look at government programs as growth markets,”
said Michael J. Tuffin, former executive vice president of America’s
Health Insurance Plans, the main lobby for the industry. “There will be
nearly $2 trillion of subsidized coverage through insurance exchanges
and Medicaid over the next 10 years. These are pragmatic companies. They
will follow the customer.”
So much money is at stake that insurers may soon be on a collision
course with the Republican majority in the new Congress. Insurers, often
aligned with Republicans in the past, have built their business plans
around the 2010 law and will strenuously resist Republican efforts to
dismantle it. Since Mr. Obama signed the law in March 2010, share prices
for four of the major insurance companies — Aetna, Cigna, Humana and
UnitedHealth — have more than doubled, while the Standard & Poor’s
500-stock index has increased about 70 percent.
Whatever Republicans do, over the next three months — the enrollment
period — consumers will hear the same messages from insurance companies
and the government urging them to sign up for health plans sold on the
exchanges. Federal law requires most Americans to have coverage,
insurers provide it, and the government subsidizes it.
“We are in this together,” Kevin J. Counihan, the chief executive of the
federal insurance marketplace, told insurers at a recent conference in
Washington. “You have been our partners,” and for that, he said, “we are
Despite Mr. Obama’s denunciations of private insurers in 2009, it became
inevitable that they would have a central role in expanding coverage
under the Affordable Care Act later that year when Congress ruled out a
government-run health plan — the “public option” that liberal Democrats
had favored. But friction between insurers and the Obama administration
continued into 2013 as the industry bristled at stringent rules imposed
on carriers in the name of consumer protection.
A turning point in the relationship came last fall, after the chaotic
debut of HealthCare.gov, when insurers waived enrollment deadlines and
helped the White House fix the dysfunctional website.
Now insurers say government business is growing much faster than the
market for commercial employer-sponsored coverage. The Congressional
Budget Office estimates that 170 million people will have coverage
through Medicare, Medicaid and the insurance exchanges by 2023, an
increase of about 50 percent from 2013. By contrast, the number of
people with employer-based coverage is expected to rise just 2 percent,
to 159 million.
In addition, the Affordable Care Act has engendered growth in the role
of private insurers in Medicaid. The law expanded eligibility for
Medicaid, and most of the new beneficiaries receive care from private
health plans under contracts awarded by state Medicaid agencies. As a
result, Medicaid enrollment is up more than eight million, or 15
percent, in the last year.
In a survey of 10 insurance companies, Joshua R. Raskin, an analyst at
Barclays, reported that their revenues from the Medicare Advantage
program were up about 10 percent this year. UnitedHealth Group’s
Medicaid enrollment surged by nearly one million people, or 24 percent,
in the last year, said Stephen J. Hemsley, the chief executive. At
another large insurer, WellPoint, the expansion of Medicaid “is proving
highly profitable,” Christine Arnold, a managing director of Cowen and
Company, wrote in a recent report.
WellPoint is a case study in how companies have adapted to the law.
In 2010, as Democrats attacked the insurance industry for what they said
were its high prices and discriminatory practices, no company was more
of a target than WellPoint, which had sought rate increases of up to 39
percent in California. But WellPoint, which operates Blue Cross and Blue
Shield plans in a number of states, is now prospering.
WellPoint announced recently that it had gained 751,000 subscribers
through the health insurance exchanges and 699,000 new members through
Medicaid. Since the end of 2013, WellPoint’s Medicaid enrollment has
increased by 16 percent, to a total of five million.
“Our government business is growing along multiple fronts” and accounted
for about 45 percent of the company’s consolidated operating revenues,
said Joseph R. Swedish, the chief executive of WellPoint.
Aetna, in reporting its third-quarter results, said many people thought
2014 would “spell the death of our industry.” But, the company said, it
is having “a very good year,” thanks in part to “excellent performance
in our government business, which now represents more than 40 percent of
our health premiums.” The company described Medicaid as a “bright spot
in the Aetna portfolio.”
Insurers and the administration still have many disagreements, but open
conflicts are rare.
“With all the politics of the Affordable Care Act, people don’t realize
how much the industry has benefited, and will continue to benefit, from
the law,” said Jay Angoff, the Obama administration’s top insurance
regulator from 2010 through 2012.
One insurer, Humana, derives about 65 percent of its revenue from its
Medicare Advantage plans. Enrollment in these plans climbed 17.5
percent, to 2.9 million, in the year that ended Sept. 30, the company said.
At UnitedHealth Group, Medicaid and Medicare Advantage together are
expected to provide more than $60 billion in revenue, or slightly less
than half of the company’s total, this year. United expects to
participate in insurance exchanges in 23 states next year, up from four
“The government, as a benefit sponsor, has been increasingly relying on
private sector programs,” United said in a document filed with the
Securities and Exchange Commission. “We expect this trend to continue.”
In another sign of the close relationship, the administration has
recruited experts from the insurance industry to provide operational
expertise. Eight months after the unit of UnitedHealth Group, called
Optum, helped repair HealthCare.gov last fall, the administration hired
a top Optum executive, Andrew M. Slavitt, as the No. 2 official at the
Centers for Medicare and Medicaid Services. The administration waived
conflict-of-interest rules so that Mr. Slavitt could participate in
decisions affecting UnitedHealth and Optum.
Now, as millions of Americans shop for insurance, federal officials are
eager to collaborate with an industry they once demonized.
“The relationship between the marketplace and insurers is really
critical to a successful program,” said Ben Walker, director of open
enrollment for the federal exchange. “Without that, we don’t have any
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