Insurers push back

The push for comprehensive healthcare reform started the year with such strong support from doctors, hospitals and industry groups, it seemed too good to last. And it didn't. This week, the coalition had its first defection: health insurers. As the Senate Finance Committee was poised to vote on its version of the reform legislation, the insurers' lobbying group released a sharply critical analysis by consultants PricewaterhouseCoopers. The report estimated that the bill would cause insurance premiums to rise an additional $1,500 to $4,000 over the coming decade. That's on top of the whopping increase expected if the bill weren't enacted, the report said.

It was a textbook case of checkbook research -- the insurance lobby wanted a damaging set of numbers, and PricewaterhouseCoopers delivered them in a transparently contrived way. The Finance Committee shrugged off the criticism Tuesday, approving the bill by a 14-9 vote. Despite the report's faults, though, the consultants had a point. There are flaws at the heart of the bill that lawmakers cannot ignore.

The insurance industry waited remarkably long to open fire, given that one of the goals of the overhaul is to stop insurers from doing many of the things they do to improve their bottom lines. Every one of the proposals for comprehensive reform tries to stop insurers from cherry-picking customers and denying claims on flimsy pretexts. But insurers backed the Obama administration's reform efforts at first because their interests aligned with those of doctors, hospitals and consumers in support of three interlocking aims: to extend coverage to all Americans, rein in rising costs and improve quality. Universal insurance coverage would bring millions of new customers to the companies and broaden the risk pool, raising insurers' revenue and spreading their costs over a wider base.

The Senate Finance Committee bill, however, won't deliver universal coverage. In fact, it would leave an estimated 25 million people, or 6% of those who are eligible, uninsured in 2019 (congressional analysts studied the bill's effect over 10 years). This shortfall is one of the main reasons the insurance lobby is unhappy. The House versions of the bill, by contrast, would cover all but 3% of the population (excluding illegal immigrants) by 2019. The House bills would spend significantly more on subsidies too -- $773 billion over 10 years, compared with $463 billion in the Finance Committee bill.