The Health Insurers Have Already Won

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ACTUARIAL ASSUMPTION

Obama's promise to boost competition and lower costs by having the government play a much broader role in health coverage has been steadily compromised because of the resistance of such Democrats as Warner. "There are different ways to skin this and get competition" in the insurance market, Warner says.

Warner and other opponents of a public plan have relied on an estimate by John Sheils, an actuary who says that 88 million people, or 56% of those with employer-provided coverage, would desert private insurance for a government-run program. That would destabilize the marketplace and potentially kill the private insurance industry, according to Sheils, who works for the Lewin Group, a corporate consulting firm in Falls Church, Va.

UnitedHealth lobbyists routinely cite Lewin's work, as do Senator Orrin G. Hatch (R-Utah), the second-ranking Republican on the Senate Finance Committee, and Eric Cantor (R-Va.), the House Republican Whip. Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils' paycheck. In an interview, Sheils says UnitedHealth gives him and the Lewin firm complete independence: "We call it like we see it," he adds.

Some Democrats differ. Says Representative Pete Stark, the liberal California Democrat who chairs the House Ways & Means health subcommittee: "The Lewin Group's so-called analysis is suspect." The nonpartisan Congressional Budget Office has stated that the Sheils-Lewin figure is far too high.

UnitedHealth brings a mixed record to its role helping to guide health reform. The company has repeatedly hit smaller employers and consumers with double-digit rate hikes in recent years, far greater than the overall rate of inflation. An investigation last year by New York's Attorney General will force the company to stop running two huge databases used widely within the insurance industry. By allegedly setting medical reimbursements too low—that is, skewing statistics in favor of insurers by understating "usual and customary" physician fees—the databases had resulted in the overcharging of consumers by billions of dollars nationwide. In January, UnitedHealth agreed to resolve the situation by paying $400 million in a pair of agreements with the New York Attorney General and the American Medical Assn., although it didn't admit any wrongdoing.

In a separate case last year, UnitedHealth was forced to stop selling "limited benefit" plans with capped payouts under the imprimatur of the senior citizen group AARP. It turned out that the policies provided very modest coverage, catching many customers off guard, according to Senator Charles E. Grassley (R-Iowa), who helped bring the practice to light. Grassley pointed out that UnitedHealth paid as little as $5,000 toward surgery costing several times as much.

Despite such episodes, UnitedHealth is generally well received in legislative circles in Washington. In late May its in-house point man on reform, Simon Stevens, hand-delivered a report to key senators detailing ways to save an estimated $540 billion in federal spending over 10 years. A week later, on June 4, Stevens accompanied UnitedHealth's chief executive, Stephen J. Hemsley, to a meeting with Senator Kent Conrad (D-N.D.), an influential moderate member of the Senate Finance Committee. Conrad has since led an effort to create nonprofit medical cooperatives that would operate much like utility co-ops as a substitute for a federally run plan. With less heft than a proposed national plan, the state medical cooperatives would pose a far weaker competitive threat to private insurers.

Conrad says in an interview that the co-op idea evolved independently of any industry input. Skirmishing over the public plan could jeopardize efforts at reform, he warns. Co-ops, he argues, are "the only alternative that's got much of a shot" to gain sufficient votes in the Senate.

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