Insurance Industry

Some may find it hard to believe that the U.S. health insurance industry supports making major changes to the nation's healthcare system. The industry, after all, scuttled President Clinton's healthcare overhaul bid with ads featuring "Harry and Louise" fretting about change. But this time, it turns out, the health insurance industry has good reason to support at least some change: It needs it.

It sure was nice seeing representatives of the insurance industry sitting down with the president and declaring that they know the healthcare system needs to be overhauled and that they definitely want to be part of the solution. Just one small thing: Does anybody trust them? I spoke last week with a variety of healthcare experts, and not one could give me a "yes" to that question.

The U.S. Treasury Department granted preliminary approval Thursday for some of the nation's largest insurance companies to receive capital infusions under the government's Troubled Asset Relief Program, Treasury spokesman Andrew Williams said. Recipients are Hartford Financial Services Group Inc., Prudential Financial Inc., Allstate Corp., Ameriprise Financial Inc., Lincoln National Corp. and Principal Financial Group Inc., he said.

Extending a lifeline to what had long been some of the nation's most prudently managed firms, the Treasury Department has decided to make ordinary life insurance companies eligible for federal bailouts. The expansion marks another sign that the economic crisis plaguing the nation and the world has spread to the seemingly safest corners of the financial system.

AIG subsidiary 21st Century Insurance said Thursday that it had laid off about 7% of its workforce -- nearly 500 workers -- and that it was losing its Long Beach office and three other locations. Just a week ago, 21st Century sent an e-mail to its customers from Chief Executive Anthony DeSantis saying that 21st Century was "financially strong" and that it had "not accessed or needed" any of the billions of bailout money that its New York-based parent company got.

When insurance giant American International Group Inc. imploded last fall, the firm's problems were quickly blamed not on its core insurance business but on an obscure operation that traded exotic mortgage securities. But as the economic crisis deepens, it has become clear that AIG's problems extend across most of its business lines, including its massive life insurance and retirement services operations, which reported a staggering $18-billion quarterly loss this month.

It might have looked as if real progress toward healthcare reform was made last week when leading insurers proposed ending their long-standing practice of charging higher rates to sick people and denying coverage to those with chronic conditions. But not so fast. A closer look at the insurance industry's plan reveals a potentially huge loophole that could short-circuit genuine reform.

The country's leading health insurers Tuesday offered to end their long-standing practice of charging sick customers higher premiums, a significant concession in the face of mounting criticism of the industry in Washington. The offer from America's Health Insurance Plans and the Blue Cross Blue Shield Assn., whose member companies cover more than 200 million people, comes as lawmakers on Capitol Hill debate a proposal to create a government-run insurance program.

Under the banner of consensus and cooperation, President Obama on Thursday brought industry leaders, lawmakers, doctors and consumer groups to the White House for a healthcare forum to build momentum for his effort to reduce costs and expand insurance coverage. But the largely symbolic event also showcased the political maneuvering -- and potential conflicts -- that is intensifying as the president moves forward on his reform initiative.