After fighting off sweeping health care legislation for almost
two years, some insurance industry executives fear they may yet
lose the war.
The premium caps, taxes and restrictions on excluding
hospitals and doctors from their networks that they disliked so
much in the major Democratic proposals seem dead.
But they might still end up with regulations they hate, in
either a stripped-down bill in Congress next year or in stringent
new state insurance laws.
And either way, there would not be universal coverage, which
would have brought the insurance companies millions of new
Having worked hard in the opposition effort that led Congress
to go home without action on health care, insurers and managed
health care companies are braced for a flood of new state
regulations. They argue that these rules would raise costs and
undermine their growing managed health care business.
The stakes are enormous for the insurance industry, which
collected about $265 billion in premiums last year. After paying
hospitals and doctors, the insurers had $50 billion left in
profits and for marketing and administrative expenses, said
Kenneth S. Abramowitz, a Wall Street health care analyst with
Sanford C. Bernstein Co.
But the rules are changing rapidly and many of the players are
concerned that they might lose all or part of their slice of the
"The battle will shift to the states and we will probably see
a flood of state legislation over the next year or two," said
George Halvorson, president of Health Partners, a big
Minneapolis-based health maintenance organization.
Like most insurers, the HMOs opposed proposals for government
caps on health care spending, and they objected to features that
they said would undermine their ability to compete by devising
new ways to finance and deliver care.
The big insurance companies bitterly opposed the Clinton
administration's plan for regional purchasing alliances that
could have taken over many of their functions.
All but a handful of states already prohibit steep increases
in insurance premiums, after an employee or family member has an
expensive illness, which make it difficult for a small business
to stay insured.
At least 34 states require insurance companies to cover any
small group that applies, and 17 states prohibit wide variations
in premiums linked to age or health status.
While the insurance companies have endorsed many of these
measures, they are fighting laws enacted in at least 25 states
that they regard as obstacles to managed care.
To be sure, the industry is far from united. Five of the
biggest insurance companies _ Prudential, Aetna, Cigna,
Metropolitan Life and Travelers _ describe themselves as health
care companies. They call their group the Alliance for Managed
Health maintenance organizations and other managed care
networks typically limit their members' choices of doctors and
hospitals to those that lower their fees and follow rules
intended to reduce costs.
Self-insured companies take their chances on paying for any
illnesses that may occur, while both HMOs and traditional
insurance assume those financial risks.
The five, which have invested heavily in HMOs and other
managed care networks, resigned last year from the Health
Insurance Industry Association of America, the trade group for
most insurance companies.
The big insurers saw themselves as managed care companies that
had little in common with smaller companies that primarily sold
traditional fees-for-service health coverage.
Independent HMOs like Kaiser Permanente and U.S. Healthcare
have their own trade groups and agendas, which promote managed
care and universal coverage. And the 69 state and regional Blue
Cross and Blue Shield Associations also try to maintain a united
front in Washington, although the associations' 69 members
include nonprofit and for-profit companies, large and small, from
both urban and rural states. …