Health insurance industry works on image makeover

WASHINGTON -- The health insurance industry is working on a transformation that could come right out of "Extreme Makeover."

Long cast as villains for denying coverage or refusing to pay for treatment, insurers now are representing themselves as indispensable partners in health-care overhaul.

In their pitch to lawmakers, the companies say they are in a position to help improve quality and root out waste, saving money so everyone can be covered.

"They are making inroads," said John Rother, public policy director for AARP. "They are getting past the rhetoric and starting to talk about more concrete ideas for improving quality and getting value."

In a change from three or four years ago, insurers are writing bigger campaign checks to Democrats, now the party of power in Washington. The insurance industry gave $10.7 million to Democratic candidates for federal office in the 2006 elections, according to OpenSecrets.org. Last year, it was $20.7 million.

The stakes are high.

If the industry's pitch succeeds, insurers will be guaranteed many more customers. The industry wants all people in the United States to be required to carry medical coverage, with government providing financial help for those who cannot afford it.

Even if insurers end up making less per customer because of anticipated consumer safeguards, they still could come out ahead.

But if the overhaul that President Obama has promised goes against them, insurers could find themselves trying to compete against a new government-run health plan offering cut-rate premiums to middle-class families.

That's exactly what many liberal Democrats want, and Obama hasn't taken the option off the table.

"No one is naive enough to believe that insurers aren't going to have problems with parts of this," Rother said. "But they are pushing back in a rather quiet way."

Said Karen Ignagni, president of America's Health Insurance Plans and the industry's top strategist in Washington: "We understand we need to come to the table with very specific solutions."

Ignagni is hedging her bets by building ties to groups such as small businesses, whose conservative outlook and grass- roots clout could be crucial.

Yet the industry has won a measure of respect from some longtime adversaries.

"I have seen very few groups, including the insurance industry, that are willing to exercise the nuclear option and torpedo reform," said Ron Pollack, executive director of Families USA, a liberal advocacy group. "They have participated in a good faith manner."

Others on the left are not convinced. "Private insurance is the problem," said Carmen Balber of Consumer Watchdog, a California-based group. "Individuals can't afford to be forced into buying private insurance."

If insurers have come to see government as a partner, that's not as strange as it may seem.

Employer coverage has dwindled in recent years, but government programs for older people, children and the poor have grown into a vital business.

The Medicare prescription drug benefit is delivered by private insurers. Also, about 10 million older people are signed up in Medicare managed care plans. Many states operate their Medicaid programs through private insurers. The same goes for the federally backed State Children's Health Insurance Program.

Government programs "are a significant contributor to growth for us," said Angela Braly, chief executive of Wellpoint, which covers 35 million people in 14 states. "We think we can be a significant part of the solution for the uninsured."

Insurance companies can do more than just pay claims, Braly said. They can use the data in their files to monitor whether doctors and hospitals are providing the right level of care -- not too little, not too much.

For example, a soon-to-be released study by Wellpoint looks at treatment of back pain, a condition that costs roughly as much as cancer or diabetes to treat.

Most back pain clears up in about six weeks, and national guidelines recommend postponing surgery and sophisticated imaging tests. But the study found that 35,000 patients had imaging tests and an additional 1,000 had surgery before the six weeks were up. Potential savings over a 12-month period: $23.6 million.

In the future, insurers could use such findings to cajole doctors into changing the way they practice.

"We think we can play a central role in delivering value," said Braly.

Wellpoint says such studies don't always endorse the low-tech option. Its research also found that a costly medication for multiple sclerosis was worth the investment, because it helped patients avoid relapses. But there's concern that insurers and government could one day use such studies to deny coverage for expensive new treatments and diagnostic tests.

It's hard to tell whether the industry's makeover will work.

So far, the Obama administration doesn't seem to be sold. While Obama invited Ignagni to the White House health care summit, he's also asking Congress to slash payments to private insurance plans in Medicare. Far from being efficient, Obama says the plans get 14 cents more on the dollar than it costs to care for older people in the traditional program.