The Battle Over Health Care: What Obama's Reform Means for America's Future

The Battle Over Health Care

ROWMAN & LITTLEFIELD PUBLISHERS, INC.

Chapter One

One of the biggest achievements of the health care overhaul was a commitment from health insurance companies to stop their most offensive and inhumane practices that angered and frustrated millions of Americans. Why did they agree to stop? After all, they aren't charitable enterprises.

Insurance company abuses were chronicled at a June 16, 2009, congressional hearing chaired by Representative Henry Waxman, a Democrat from California. During the hearing of the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee, members of Congress heard testimony about how health insurance companies treated many of their policyholders.

The committee had requested information from fifty state insurance commissioners and three health insurance companies that offer individual health insurance policies: Assurant Health, WellPoint, and UnitedHealth Group. With 116,000 pages of documents and interviews with numerous policyholders who had had their coverage terminated or "rescinded" after they became sick, the committee let the world see a glimpse of the abuse.

An Illinois man diagnosed with lymphoma had his health insurance policy terminated because he failed to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him. The company denied him chemotherapy and a life-saving stem cell transplant. After direct intervention from the Illinois Attorney General's Office, his insurance was reinstated and he continued with treatment.

A Texas woman diagnosed with a lump in her breast had her health insurance cut off when the company investigated the patient's medical history and found that she did not disclose that she had been diagnosed previously with unrelated osteoporosis and bone density loss. The company rescinded her policy and refused to pay for medical care for the breast lump.

Americans are already benefiting from the law. Insurers agreed to stop denying coverage to children with preexisting medical conditions. People who are sick have no lifetime limits on benefits. Children can stay on their parents' family plan until age twenty-six. Insurance plans must offer preventive services such as mammograms and colonoscopies without charge. Women can go to obstetricians and gynecologists without a referral from another doctor.

Beginning in 2014, insurers agreed to stop canceling policies when policyholders become ill. They will stop denying insurance to adults with preexisting medical conditions and charging higher rates because of poor health.

Most Americans like these commonsense protections. Seventy-five percent of people say they favor the prohibition against insurance companies denying coverage because of preexisting medical conditions. Two-thirds favor allowing children up to age twenty-six to stay on their parents' policies, and most believe the elimination of lifetime caps on insurance coverage is a good idea.

As the health insurance companies agreed to these concessions, another story was playing out behind the scenes.

GOOD-BYE PUBLIC OPTION

One of the most controversial ideas in the health care reform debate was the public option. Here's how it was supposed to work. Uninsured Americans could choose a new public health insurance plan similar to Medicare. The public plan would be less expensive than private insurance because it would incur no marketing costs, profit margins, or high salaries that are characteristic of private insurance companies.

An outspoken proponent of the public option, former Vermont governor and physician Howard Dean, made the case for it this way: "I don't think we ought to dump $60 billion a year" onto the insurance industry because it would be pouring money into a broken system.

The idea was to give Americans a choice between a public option and private insurance. "If they think the private sector is great, they will stay in the private sector—if they like insurance that can be taken away if they get sick," said Dean. "Or you can try what everyone over sixty-five in this country has had.... [Medicare] can't be taken away; it can't be denied to you." With competition from a public option, the insurance companies would have to clean up their act and treat their customers better, he said.

The public option met with fierce resistance. John Boehner, who was House Minority Leader for the Republicans at the time, said the public option was "about as unpopular as a garlic milkshake." Conservatives decried it as a government takeover of health care.

In raucous town hall meetings during the August 2009 congressional recess, members of Congress heard from people opposed to health care reform. The insurance industry orchestrated a plan for thousands of its employees to voice opposition to the public option. Competition with a public option would be a death knell for the insurers because they could not compete successfully with a public plan. The firestorm compelled President Obama to step back from the public option, saying it was "just one sliver" of reform.

To smash up the whole health care reform process, insurance companies funneled millions of dollars to the US Chamber of Commerce for television ads blasting the bills in Congress. Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group, and WellPoint reportedly chipped in to pay for the ads.

At the same time, Karen Ignagni, the chief lobbyist for the insurance industry trade group America's Health Insurance Plans (AHIP), wrote a letter published in the Washington Post saying, "Let me be clear and direct. Health plans continue to strongly support reform." Yes, they wanted reform, but it had to be on their terms.

To salvage a health care overhaul, President Obama unveiled a new plan in February 2010 that left out the public option. Instead, it included a requirement that everyone buy private health insurance, a flashpoint in the health care reform drama.

The idea of a mandate was not new. During the 2008 presidential campaign between Barack Obama and John McCain, Ignagni visited Obama's health advisors and proposed the idea. In return, the industry agreed to stop dropping coverage for people when they were sick and discriminating against those with preexisting medical conditions.

During the 2008 presidential campaign, Obama was not enamored with the idea of a mandate but warmed up to it later. He said, "When I ran in the Democratic primary, I was opposed to the mandate.... My theory was ... people don't have health insurance ... because they just can't afford it. So I was dragged kicking and screaming to the conclusion that I arrived at, which is that it makes sense to have everybody purchase insurance. ... This is not a Democratic idea. There are number of Republicans ... who have supported the idea of an individual mandate."

The health insurance industry saw the writing on the wall. A growing number of middle-class Americans and employers can no longer afford to buy health insurance because it is too expensive. The public option would accelerate the decline of private health insurance in America.

Insurers saw opportunity in health care reform to obtain more market share. They had their sights set on a never-ending federal stimulus that would bolster their bottom line in perpetuity.

THREE WISHES

The health insurance industry had staked out its position early in the 2008 presidential campaign when Barack Obama made health care reform a priority. After the November 2008 election, it issued a public statement with its "must-haves" in a reformed health care system. The industry sought to convince the White House and congressional leaders to subsidize people who purchased private health insurance. This strategy would halt the erosion in private insurance and expand the industry's customer base. It was a shrewd strategy.

According to the industry's script, insurers would agree to stop their most egregious practices. In return, they insisted that everyone be brought into the system and participate in obtaining coverage. The insurers signaled the individual mandate as a "must-have." They realized that many Americans would buy insurance only if they were forced to do so. "Achieving this objective will require specific attention to the mechanisms for making the mandate enforceable," they said in a public statement. In other words, the health insurers wanted the government to impose penalties to force people to buy their products.

Insurers were granted their first wish. The Obama administration included the individual mandate to buy private insurance in its February 2010 salvage plan along with penalties for failure to comply. The Republicans excoriated the individual mandate and its Democratic party supporters when, in fact, the mandate was a centerpiece of the health insurance industry's strategy.

The industry wanted more. Insurers proposed that the federal government help small businesses provide coverage for their employees. They wanted tax-code incentives or other types of assistance to encourage small businesses to offer or contribute to coverage. The insurers were specific. Small firms with lower-wage workers should receive taxpayer-funded subsidies.

The industry was granted this second wish. The White House plan included tax credits for small employers with lower-wage workers.

Finally, the industry scored the biggest win of them all. Insurance companies wanted American families who earn less than $88,000 a year to receive taxpayer subsidies to help them buy their products. The White House agreed to the federal subsidies for low- and moderate-income families.

With the stroke of a pen, the insurance industry gained sixteen million new customers beginning in 2014. Most of the new customers will qualify for federal subsidies that will shield them from the financial impact of the individual mandate.

In return, the health insurance industry agreed to stop its worst abuses: preventing sick people from buying insurance, increasing premiums for people who have the misfortune of being sick, charging higher premiums because of a policyholder's gender or occupation, and imposing lifetime and annual coverage caps on benefits. The health care overhaul identifies essential benefits that must be covered by insurance plans and requires a fair grievance and appeal process.

These concessions were a down payment made by health insurers on a very lucrative investment. The "mortgage" on this investment will be paid by Americans through premiums and taxpayer-funded subsidies that will balloon in years to come as health care costs continue to rise out of control.

For consumers, health care reform is like an adjustable-rate mortgage. It begins with attractive, low-cost introductory teasers—the new features that so many people favor such as no limits on lifetime benefits. Eventually, ballooning premiums will be too high for the federal government to subsidize at levels stipulated in the health care reform law.

In the end, the health care reform law richly rewarded health insurance companies in return for a commitment to change their practices. Will they really change?

THE INDIVIDUAL MANDATE: PRINCIPLE, POLITICS, AND POCKETBOOKS

The battle over health care continues. Opponents of the individual mandate want it to go away. For some, it is a matter of principle. For others, it is about politics. For those required to buy insurance, the mandate is a matter of their pocketbook.

Virginia was the first state to fire a shot in the battle over the mandate. In a preemptive strike in early March 2010 before Congress voted on the White House makeover plan, the Virginia House of Delegates voted eighty to seventeen in favor of a new law saying that no resident of the commonwealth should be required to obtain or maintain individual health insurance coverage.

The bill's sponsor, Republican Robert G. Marshall, quipped to a reporter, "Mobsters used to offer 'protection' to business owners, so when Congress says that if individuals don't become customers of businesses that contribute to them, to me that crosses the line.... For me, it is hard to distinguish what is going on in Washington, D.C., from criminal activity." Republican Governor Bob McDonnell signed the bill into law.

In special ballot initiatives during the midterm elections in November 2010, Arizona and Oklahoma residents voted against the individual mandate. Colorado voted in favor of it. These results came on the heels of a Missouri vote in August in which 70 percent of voters disapproved of the individual mandate.

In the fall of 2010, the battleground shifted to the federal district courts, where state governments, conservative stalwarts, businesses, and others filed separate legal challenges to the reform law, and many were about the individual mandate.

Five decisions were handed down by federal district courts from October 2010 through February 2011. They are proof that health care reform is as partisan as it can be.

Federal judges appointed by Democratic presidents upheld the individual mandate. US District Court Judge George Steeh in Michigan, appointed by President Bill Clinton, ruled that the individual mandate is constitutional. Steeh wrote in his opinion that it acknowledges the reality that most people will get sick someday and will need a means to pay for it.

The health care market is unlike other markets. No one can guarantee his or her health, or ensure that he or she will never participate in the health care market.... The question is how participants in the health care market pay for medical expenses—through insurance, or through an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties. This phenomenon of cost-shifting is what makes the health care market unique.... Plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.

Shortly after Judge Steeh's ruling, a federal judge in Lynchburg, Virginia, also rejected a legal challenge to the mandate. US District Court Judge Norman Moon, another Clinton appointee, penned an opinion that resonated with a similar theme:

I hold that there is a rational basis for Congress to conclude that individuals' decisions about how and when to pay for health care are activities that in the aggregate substantially affect the interstate health care market.... Nearly everyone will require health care services at some point in their lifetimes, and it is not always possible to predict when one will be afflicted by illness or injury and require care.

In February 2011, Judge Gladys Kessler of the US District Court in Washington, DC, dismissed a lawsuit against the individual mandate brought by three people who said that they did not intend to use medical services for the rest of their lives for religious reasons and two others who said they use holistic healing practices that health insurance does not cover. Judge Kessler rejected their arguments saying that Congress can regulate health insurance under the Constitution's commerce clause, and that individuals can pay the penalty prescribed in the law if they decide not to purchase insurance.

Two federal judges appointed by Republicans had their turn and ruled against the mandate. US District Court Judge Henry E. Hudson in Richmond, Virginia, was the first federal judge to strike down the individual mandate and rule that Congress exceeded its powers by requiring individuals to have health insurance or pay a penalty to the federal government. An appointee of President George W. Bush, Judge Hudson declared that the provision overstepped the bounds of authority granted in the Constitution: "Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.... At its core, the dispute is not simply about regulating the business of insurance—or crafting a scheme of universal health insurance coverage—it's about an individual's right to choose to participate."

Judge Hudson also disagreed with the Obama Administration's argument that federal tax law allows the government to require individuals to pay a penalty if they fail to purchase insurance, stating that the penalty is not intended to raise revenue.

US District Court Judge Roger Vinson from Pensacola, Florida, who was appointed to the bench by President Ronald Reagan, said that if Americans can be forced to have health insurance because everyone needs health care, that logic can be used to force people to buy groceries or clothes.

(Continues...)

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Excerpted from The Battle Over Health Care by Rosemary Gibson Janardan Prasad Singh Copyright © 2012 by Rowman & Littlefield Publishers, Inc.. Excerpted by permission of ROWMAN & LITTLEFIELD PUBLISHERS, INC.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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