Introduction
RALEIGH, N.C. — Health insurers are demonstrating once again — this time in state capitals — that they cannot be trusted to do the right thing for consumers when health care reform is up for debate.
President Obama and Congressional leaders learned the hard way that insurance executives were playing them like a Stradivarius in promising to be good-faith partners on reform. In the end, though, the politicians realized that insurers had been carrying out a duplicitous PR strategy from the start. Even as the firms pledged at a March 2009 White House summit to help enact reform, they already were using millions in policyholder premium dollars to conduct a scare campaign against many of the key reform proposals supported by the Democrats.
The latest evidence of their duplicity can be found in Raleigh, where state lawmakers will vote in coming weeks on legislation to create a health insurance exchange, as required by federal law.
The law directs states to have exchanges up and running by January 1, 2014, and it encourages states to establish exchanges that, as the National Academy of Social Insurance has noted, “will promote effective competition for health insurance and offer a wide selection of coverage options to individuals and businesses.
Here in Raleigh, Blue Cross Blue Shield of North Carolina (BCBSNC) — by far the state’s biggest insurer — has helped draft a bill that would give the firm power to do the exact opposite of what Congress intended. If enacted, the bill would actually enable BCBSNC to control the exchange’s ruling body, which could lead to a further reduction in competition and an undermining of efforts to help consumers make prudent choices when buying coverage.
It’s a brazen power grab, but BCBSNC is so big and influential that consumer advocates worry that the bill will become law, making the exchange a vehicle for the insurer to increase its already formidable market share and lure more people into highly profitable but often inadequate benefit plans.
In recent years, one or two insurers have become so dominant in most states that other carriers find it almost impossible to establish much of a presence. That is especially true in North Carolina, where in 2009 BCBSNC took in 71.3 percent of all dollars spent on health insurance premiums, according to the North Carolina Department of Insurance. As recently as 2003, BCBSNC’s market share was just about 60 percent.
Insurers that enjoy such dominance worry that an exchange they can’t control would enable competitors to get a foothold and grow — at their expense. And that’s why BCBSNC persuaded a Republican legislator to quietly introduce a bill in the GOP-controlled House that would pack the exchange board in the insurer’s favor.
Consumer advocates say they had previously been lulled into thinking that BCBSNC could be trusted because the insurer participated—seemingly as a good-faith partner—in a broad process to craft a consensus exchange bill to present to lawmakers this year.
The work was part of a broader effort led by the North Carolina Institute of Medicine, an independent, quasi-state agency established by the legislature in 1983 “to provide balanced, nonpartisan information on issues of relevance to the health of North Carolina’s population.” Soon after President Obama signed the Affordable Care Act last year, the IOM convened several stakeholder groups—including insurance companies, doctors, hospitals and consumers — to consider how best to implement reform in the Tar Heel State.
The IOM group tasked with crafting policies and procedures for the state’s exchange spent months negotiating and drafting recommendations to present to the General Assembly. According to Adam Linker of the North Carolina Justice Center, a progressive advocacy and research organization that participated in the IOM work, BSBCNC made several suggestions, the majority of which were adopted by the group.
“Consumer groups worked hard to write exchange recommendations that insurance companies could accept,” Linker said.
Last week, consumer advocates discovered that BCBSNC executives had been working behind the scenes all along on their own exchange bill, which was introduced without advance warning by the chair of the House Insurance Committee, Jerry Dockham. Until recently, Dockham earned a living, aside from what he makes as a legislator, by running an insurance agency.
In BCBSNC’s bill, many of the consumer protections the various stakeholder groups had agreed to were nowhere to be found. For example, the exchange would not be allowed to limit the choices of health benefit plans to those that provide solid value to consumers. All plans, regardless of how inadequate they might be, would have to be offered. Also, no standardization would be allowed, meaning that consumers would not be able to get the information they need to make apples-to-apples comparisons between plans.
Among the objectives of reform was to require transparency about how insurers operate, and to provide essential information in a format that would allow consumers to make informed choices. The BCBSNC’s bill essentially would create little more than an Internet-based platform where the insurer could market and sell its policies – rather than a real exchange that would allow consumers to make meaningful comparisons among competitor policies.
Perhaps most audacious was how the bill essentially gave control of the exchange board — and, by extension, to the state’s whole insurance marketplace — to BCBSNC. Forever. While some states, such as California and Massachusetts, have purposely excluded insurance companies from serving on such boards because of conflict of interest concerns, BCBSNC would have a permanent seat on a proposed 11-member exchange board in North Carolina.
The board would also include an insurance agent (someone like Dockham) and representatives of two of the insurance industry’s most reliable allies: the Chamber of Commerce and the National Federation of Independent Business. (Last year, the insurance industry funneled $86 million to the U.S. Chamber of Commerce to help finance an advertising and PR campaign opposing reform ideas the industry didn’t like, such as establishing a public option that would compete with private insurers.)
In addition to the Blue Cross seat, executives of two smaller insurers would serve three-year terms on the board. The state hospital association and the state medical association would also have seats. The panel would additionally include an economist. Consumer groups would have two board seats.
Rep. Verla Insko, a Democrat, has proposed an alternate bill with a board that would have eight members, none of whom would be representatives of the insurance industry. Two members would represent employers and two would represent the general public. The four others would be individuals with expertise in information technology, health economics, actuarial science and health policy analysis or law.
Insko’s bill also contains a section on ethics. One provision states that “each member of the board shall comply with all conflict of interest rules and recusal procedures set forth in the Plan of Operation.” The BCBSNC bill has no such language.
So far, BCBSNC has not commented officially on the legislation. Lou Borman, a spokesman for the company, told me the insurer does not have an official statement on either bill. “Our view is that the conversation is just beginning,” he said, adding, however, that the company felt it was appropriate for it to have a seat on the board “because of our expertise.”
The consumer advocates, meanwhile, are upset and, frankly, embarrassed that they proved so gullible.
“I can’t overemphasize how hard consumers worked to get agreement from Blue Cross,” said Linker. “We put our reputations on the line. We spent hours in negotiations. But Blue Cross betrayed the process and betrayed us by filing a radically anti-consumer bill. They promised that even if they disagreed with us on an issue they would keep us informed of what they were doing. Obviously, we were duped.”
The embarrassment at being taken has fired up the consumer advocates, who have pledged to fight the BCBSNC’s legislation and support the bill introduced by Insko, who is hoping that a few Republicans will sign on as co-sponsors when they find out what BCBSNC’s real motives are.
The American Cancer Society and the American Heart Association laid out their objections to the BCBSNC’s bill in a letter to the IOM, the state insurance commissioner and state legislators.
“We will be working diligently against Blue Cross’ attempt to monopolize North Carolina,” American Cancer Society lobbyist Christine Weason told me. “The thought of allowing the insurance industry the opportunity to create a system to which they will enjoy billions of dollars in profit is shocking and sets a dangerous precedent.”
Weason said the American Cancer Society believes the composition of the exchange board is key to how the Affordable Care Act is implemented in North Carolina.
“This provision marks the crux by which all other implementation language will be measured,” she said.
“At this monumental moment, all individuals have the opportunity — perhaps for the first time — for affordable and accessible health care…The Affordable Care Act takes the first step to level the playing field, and it allows folks the opportunity to save their lives, not spend their life savings, in seeking the medical treatment they desperately need. We are not going to let Blue Cross, or any insurer for that matter, keep us from achieving that goal.”
News analyst Wendell Potter, a former insurance company executive, is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans.
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