The Covert Rationing Blog

Why Health Insurers Will Support Hillary Clinton

February 4th, 2008 by DrRich

As Hillary Clinton’s plans for American healthcare resolve into sharper relief, it is becoming clear that her plans dovetail quite nicely with the increasingly desperate needs of the health insurance industry. And, in contrast to 1993 (when the insurance industry initially supported her reforms, until getting a look at the monstrous volume of regulations she and her secretive committee finally produced, at which time they turned against her with extreme prejudice and a massive advertising campaign), this time Ms. Clinton can rely on the insurers’ steadfast - well, at least silence, if not outright support.

The difference? In 1993-94 the insurance industry had options. As insurers looked out across the healthcare landscape in that golden era, they perceived only opportunity as far as the eye could see. But then they spent the next 15 years clear-cutting that rich landscape. Today when it lifts its eyes from devouring its latest kill (prizes that now require the greatest of exertions), the insurance industry can see only growing desolation. Ahead lie lean times, if not oblivion.

It takes merely a quick look at how the health insurance industry has made all its money since 1994 to reveal just how barren its current prospects have become. This topic is treated in detail here, but to summarize, the insurance industry has made its billions in three ways:

1) Acquiring and privatizing community assets - generally non-profit hospitals and non-profit insurers - for a tiny fraction of their true value (through the collusion and/or ignorance of boards of trustees, state attorneys general, and state insurance commissioners), then letting the market assign the actual value of those assets to the company’s stock price.
2) Mergers and acquisitions of smaller insurers, i.e., through the consolidation of the industry.
3) Taking advantage of certain opportunities for “efficiency” that its quasi-monopoly has brought it, such as cherrypicking patients, handcuffing doctors, retrospectively denying coverage to insured individuals, and the manifold other activities we can safely bundle under the rubric, “covert rationing.”

All three pathways to profit are nearly gone. There are few community-owned assets left to acquire, and consolidation has already left the U.S. with just a handful of important health insurance carriers. As for the “efficiencies,” opportunities here are drying up as well. For instance, in December, shareholders of UnitedHealth Group (concerned because subscribers to the company’s insurance products had decreased by 315,000 in 2007) demanded and received a promise from company executives that the insurer would become “nicer” to its subscribers. (This, obviously, is a sign that insurers’ efforts at covert rationing - which simply means rationing by whatever means you can get away with - is reaching its effective limits. When your own shareholders force you to back off, you’ve gone too far.)

Now that its three pathways to profit are rapidly closing, the insurance industry is at last faced with a truly frightening prospect - having to figure out how to make a profit (much less continue to grow, as shareholders commonly expect and demand) by actually managing the healthcare of sick people. Since they have absolutely no clue as to how to accomplish this feat, the insurers find themselves staring into the void.

And this is where Hillary Clinton comes in.

Each year more individuals and employers are being priced out of the health insurance market, so health insurers are already severely growth-challenged when it comes to their classic source of premiums-based income. Already, tapping into federal health insurance funds has become the chief and most reliable source of growth for health insurance companies. To say it another way, private health insurance companies are now relying on federal programs as their only viable source of future growth.

So right off the bat, Republicans are a non-starter for insurance company executives who are looking for a presidential candidate to support. Republican candidates would have us rely on the efficiencies of the marketplace and the ingenuity of American companies to solve the healthcare mess. Perhaps this is true for some species of entrepreneurs, but not so with health insurance executives. While the insurance industry was able to support such free-market solutions as recently as 1994, today they have completely shot their wad, and are now entirely bereft of serviceable ideas. Indeed, their only serviceable idea is to do what they’re already doing to the fullest extent they can - to go on the public dole.

Either of the remaining Democratic presidential candidates would suffice, but of the two, Ms. Clinton clearly offers the better deal. She, like Mr. Obama, wishes to insure the 47 million currently uninsured Americans, and is willing to subsidize premiums for private insurance for at least a proportion of those individuals. That, obviously, is good for insurance companies. But unlike Mr. Obama, Ms. Clinton would go further in making the purchase of such insurance mandatory. And better yet, it appears she’s willing to at least consider forcibly deducting your health insurance premiums from your wages (which, really, is no different from forcibly deducting income tax, Social Security or Medicare payments from your wages - so no big deal).

So with a Clinton victory, the health insurance industry stands to reap one last windfall for their efforts, after which they will go quietly into the long night. It will be a graceful exit, and a delayed one - far, far better than what the Republicans offer (a frenetic spinning of wheels followed by catastrophic collapse.)

To an American health insurance executive, Ms. Clinton’s offer is as good as it can possibly get, given that it’s 2008 and things are as they are. If she is the least bit worried about encountering Harry and Louise again as she advances her plan for healthcare reform (or rather, Jason and Tiffany, as they’d have to be named today), Ms. Clinton can relax.

Posted in General Rationing Issues

2 Responses to “Why Health Insurers Will Support Hillary Clinton”

1. BobMan wrote on 02/5/08 at 10:17 am :

   Speaking of UHC; here in Indiana, a hospital chain and UHC are mixing it up:

   http://www.indystar.com/apps/pbcs.dll/article?AID=/20080205/BUSINESS/802050326

   Push ‘em too far and they will revolt.
   FYI… this is the second medical group in Indiana that has pushed back against the insurance industry. The dogs of the health funding war are on the loose!

2. DrRich wrote on 02/5/08 at 11:20 am :

   BobMan,

   How surprising that UnitedHealth Group has not fully embraced the “play nice” promise they made their shareholders!

   DrRich

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