Health care "reform," Big Business, and the Harry and Louise myth

Posted: June 20th, 2009 by Militant Libertarian

by Timothy P. Carney, Washington Examiner

Democrats pushing for a health-care overhaul today say they’ve learned their lessons from the failure of HillaryCare in 1993: This time they are ready to fight back against the HMOs, and to take on “Harry & Louise,” the fictional couple that insurance companies used in TV ads opposing HillaryCare.
Alternatively, other Democrats say they’ve learned their lesson, and this time they’re sitting down with the HMOs so that the Big Businesses doesn’t torpedo the reform as they did with Harry & Louise.
But this narrative of reformers-vs-Big Business was as false in 1993 as it is today. In both battles, Big Business has sided with Big Government, the pugnacious rhetoric of the pro-regulation side notwithstanding.
The HMOs in 1993 broke away from the smaller insurers, because the big guys knew HillaryCare would be profitable. Big Government would funnel customers into these HMOs more efficiently than the market would.
And today, the insurance industry and the drug industry, which have been at the table crafting the “reform,” stand to profit handsomely–at the expense of taxpayers and consumers–if the right plan becomes law.
Vice President Joe Biden unfurled the old wives tale during the presidential primaries to play up his toughness. “It really is going to take someone who is going to be able to take on the insurance industry. They spent $250 billion last time, with Harry and Louise, to poke holes in the Clinton plan. They’re going to spend half a trillion dollars this time.”
Many journalists, in contrast, like to note that the insurance industry has “matured,” and this time they aren’t battling reform as they did in 1993.
Both accounts are misleading. There never was uniform insurance industry opposition to HillaryCare. Insurers were split back then, and–as is often the case–the biggest businesses supported more government while their smaller competitors resisted regulation.
The dividing line ran between HMOs and smaller traditional insurers who provided “indemnity plans.” Most small-to-medium insurance companies didn’t have the networks and the talk of primary care physicians you hear today.
Sick people went to the doctor, and insurers shared the tab. But bigger insurers saw better profits by becoming Health Maintenance Organizations, with all the labyrinthine rules and networks we know today.
A May 1993 article from the New York Times describes the political dynamic during the HillaryCare debate. The HMOs–Prudential, Met Life, Cigna, Aetna, and Travelers–supported Hillary’s plan for government-created “health alliances,” which were, effectively government-run cartels through which all insurance would be purchased. Smaller insurers, meanwhile, got the bad rap for opposing a “reform” they knew would help their big competitors.
The Times paraphrased an independent investment analyst saying, “the insurers that already had a large foothold in the HMO business would benefit greatly from the administration’s plans to pay for insurance for the 37 million Americans who are now uninsured. In essence, the Government would pay tens of billions of dollars to create a huge new pool of customers for health insurers.”
Hillary’s plan divided the industry. The Times reported in 1993, “The five giants recently broke off from the Health Insurance Association of America [HIAA], their longtime trade group in Washington, to form their own organization, the Coalition for Managed Competition, which is closer to the administration thinking on most issues.” The HMO group’s very name reeks of government cartelization via “managed competition.”
It was the HIAA–the smaller, traditional, non-HMO insurers–that ran those Harry & Louise ads against HillaryCare. The HMOs? They hired former AFL-CIO lobbyist Karen Ignagni and worked with the Clintons for federally “managed competition.”
The industry’s schism has since healed, in part because so many small traditional insurers went out of business even without a nudge from Hillary. The reunited lobby, America’s Health Insurance Plans (AHIP), under Ignagni’s leadership, is supporting the key aspects of Senate Democrats’ plans.
For obvious reasons, AHIP likes the proposals to require all individuals to carry insurance and all employers to offer it. With those gifts in hand, it’s no sweat for them to support regulations forbidding price discrimination or the rejection of ill applicants–regulations, by the way, that would hurt smaller companies more than bigger ones.
AHIP is opposing Democrats on creating a robust “public option”–forcing insurers to compete against government–but otherwise the group is on board with “reformers,” just as the HMOs were on board 16 years ago.
It’s nice work these reformers have – getting credit for battling corporate while the biggest businesses provide air support.

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