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WellPoint, peers focus on health reform rules, campaign

August 3, 2010

WellPoint Inc., UnitedHealth Group Inc. and three other health insurers, criticized by Democrats during the health care reform debate, are seeking to influence how the new law will be implemented, and possibly change it, by campaigning for supportive congressional candidates.

Senior government-relations staff from Indianapolis-based WellPoint and its peers UnitedHealth, Humana Inc., Aetna Inc. and Cigna Corp. have been meeting for at least two months to discuss the plan, which may include creation of a $20 million war chest, said two people familiar with the matter. The group also is debating whether Karen Ignagni should remain as head of the trade group America’s Health Insurance Plans, said a third person familiar with the discussions. All declined to be named as the talks are private.

The strategy sessions mark the first major public split from within the trade group, known as AHIP, over how to address the overhaul. The five largest publicly traded insurers may be unhappy with how the group represented them in the debate, said Paul Keckley, of the Deloitte Center for Health Solutions.

“They think they were spanked a little bit, especially the for-profits, in the writing of the bill,” said Keckley, executive director of the center, Deloitte LLP’s Washington- based research unit. “The rule-making process going forward still could be influenced by who is sitting in the House and Senate.”

The election push will be bipartisan, aimed at giving the industry cover from critics who might otherwise say insurers are favoring Republicans, said one of the sources. The Democrats it supports will be those who backed provisions favored by insurers during the health debate, the person said.

“What they’re aiming at is the belief that Republicans are going to make great strides in the next election,” said Robert Laszewski, president of Health Policy & Strategy Associates, an Alexandria, Va., consulting company. “If there is a Democratic majority, it’ll be possible to put a majority together from Republicans and Blue Dog Democrats.” The Blue Dogs are Democrats who describe themselves as conservative or moderate on fiscal issues.

Neither Laszewski nor Keckley is involved in the talks.

So far, the insurers haven’t decided exactly how much they will spend or the full list of members they will target and support, according to the people involved in the meetings.

The overhaul, signed into law March 23, passed the House by a 219-212 vote. All the supporters were Democrats, while 34 Democrats and all 178 Republicans voted no. In the Senate, all 58 Democrats and two independents approved the bill, with 39 Republicans opposed.

Not-for-profits that belong to the insurer trade group include Kaiser Permanente, based in Oakland, Calif., and Harvard Pilgrim Health Care, based in Wellesley, Mass. The new health law not-for-profit plans more leeway to raise premiums and shields them from some new taxes, said Deloitte’s Keckley.

At the same time, for-profit companies drew most of the fire from Democrats while the overhaul was working its way through Congress.

President Barack Obama summoned the chief executive officers of WellPoint, UnitedHealth, Aetna and Cigna to the White House on March 4 to complain about what the U.S. health secretary, Kathleen Sebelius, called “jaw-dropping” rate increases.

The companies “couldn’t give me a straight answer as to why they keep arbitrarily and massively raising premiums,” Obama said in his weekly address two days later.

Among the large plans, “there’s a general sense that it’s not an even split between the benefits of the newly insured and the burden of the new taxes,” Keckley said. “I think they would probably all say, ‘We didn’t get a great deal.’”

The insurers stand to add as many as 32 million customers by decade’s end through the health-care overhaul, according to Congressional Budget Office estimates. The industry fended off a government-run “public option” that would have competed with private plans.

Insurers will have to contend with $130 billion in funding cuts in the Medicare Advantage program for the elderly, $100 billion in additional taxes over the next decade, and rules that force insurers to take all customers regardless of health. The law imposes new limits on administrative expenses and increases scrutiny of rate changes.

Until now, the industry organization was held together by Ignagni and her chief supporter, Health Net Inc. CEO Jay Gellert, AHIP’s board chairman until July, the people said. Health Net is a for-profit company based in Woodland Hills, California.

“Karen Ignagni’s stewardship during the reform debate and passage was, and continues to be, uncommonly strong, steady and insightful,” Gellert said in an e-mail.

Ignagni and AHIP have faced public criticism within the industry.

“If you look at the outcome, and our industry being vilified, that’s a bad outcome,” said Cigna CEO David Cordani, in a Forbes magazine article in April. “I’m an outcomes guy, not a process guy. Where I went to school, that’s an F.”

In a July 23 interview with Bloomberg News, Cordani declined to comment when asked if Ignagni should keep her job. Cigna, based in Philadelphia, has been “very supportive” of Ignagni and “we’ve been very supportive and worked closely with AHIP,” he said.

WellPoint is the biggest U.S. insurer by enrollment, followed by Minnetonka, Minn.-based UnitedHealth Group. Kristin Binns, a WellPoint spokeswoman, and Tyler Mason, a UnitedHealth spokesman, declined to discuss the insurers’ election plans, or their stance toward AHIP, in telephone interviews.

David Carter, a spokesman for Hartford, Conn.-based Aetna, declined to comment in an e-mail. Tom Noland, a spokesman for Louisville, Ky.-based Humana, didn’t return a call.

“Our association has a large and diverse membership that has grown since the passage of the new law,” said Robert Zirkelbach, an AHIP spokesman, in an e-mail. “We follow the strategy set by our board of directors. Rather than responding to anonymous sources, we will continue to work closely with our members to implement reform in a way that holds down costs and minimizes disruption for the 200 million people they serve.”

The companies have discussed the potential ousting of Ignagni, the industry’s public face in Washington since AHIP’s 2003 founding, said the third person who confirmed the industry strategy sessions. The focus of the meetings, at least for now, remains on the election effort, with concerns about AHIP’s leadership secondary, said one of the other people involved in the talks.

The $20 million figure was previously reported by the Center for Public Integrity, a Washington-based not-for-profit group. The people familiar with the meetings said no amount has been decided on yet because the companies are still developing their strategy.

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