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Wednesday, Sept. 2, 2009

Former Health Insurance Executive Wendell Potter

He Explains How Insurance Companies Are Protecting Their Profits and Fighting Health Care Reform

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Hugely profitable insurance companies are behind the efforts to derail health care reform, argues Wendell Potter, a former public relations executive for insurers Humana and CIGNA. Once a crafter of spin and damage control for the insurance industry, Potter has had a change of heart and now is speaking out on how the industry is trying to scare people away from a “government takeover” of the health care system while crafting so-called reform that protects its massive profits. Potter, a senior fellow on health care at the Center for Media and Democracy, will speak at Fighting Bob Fest on Sept. 12 in Baraboo, but first he spoke to the Shepherd about his hopes and fears for health care reform measures being debated in Congress.

Shepherd:You were a contented Humana and CIGNA employee for 20 years. Now you’re speaking out against the industry. What do you understand today that you didn’t know then?

Potter: I began to see the lengths to which the companies will go to enhance shareholder value. In other words, to reward shareholders and increase their profits. That includes dumping sick people who are enrolled in their plans when they have the opportunity. They want to get rid of as many unhealthy people as they can so that they are obligated to pay fewer claims. They have a variety of ways of doing this. It’s one thing that I learned toward the end of my career, the primary reason why I left the industry.

Shepherd: Wasn’t that something the industry was doing all along?

Potter:It’s something that increased over time, and it’s something I certainly wasn’t aware of when I first started working in the industry, back in 1989. But over the course of those 20 years the industry became much more dominated by for-profit insurance companies. Today the industry is dominated by seven or eight large health insurance companies that are all for profit. That means that a third of us has a benefit plan through one of those companies. But their main objective, because they’re for profit, is to enhance shareholder value. The consolidation in the industry and the rapid change from nonprofit status to for-profit status is what has made a big difference in the industry taking these measures to make sure that they are enrolling just the healthy people.

Shepherd: As you listen to the debate on health care this summer, are you finding the fingerprints of industry on it?

Potter: That was really why I decided to speak out against the industry. I absolutely do recognize the fingerprints of the industry all over what you’re seeing to try to derail reform or change it so that it benefits the health insurance industry more than Americans—in particular, the efforts to defeat or carve out of the legislation the creation of a public health insurance option. The insurance industry does not want that because it believes that it might take away some customers or take away some potential new customers. That’s the main reason why they’re fighting it. The other is that they know a public plan could operate more efficiently. It can operate in a lot of ways like a nonprofit plan does today. They don’t need to send money to shareholders and they don’t need to spend as much money on sales and marketing.

Shepherd: Many reform alternatives have been proposed. What’s your take on their ability to fix the problem?

Potter: The one that’s talked about most prominently is creating co-operatives.

That is something that you could probably trace the origin to the health insurance industry, even though the industry says it is not in favor of these co-ops. It would not be an effective competitor. It would not be anything that would ever have a chance of succeeding. They would be starting out undercapitalized. In the health insurance industry, size makes a big difference. Coops would not have any chance of scaling up to be competitive. That would mean they could never attract enough members to make a go of it. So they would be doomed to failure.

Shepherd: But that would look like reform, wouldn’t it?

Potter: That’s the problem. That’s why I think the health insurance industry and opponents of reform are hoping that something will be passed that people will believe is real reform but it really won’t be. It will be a gift to the health insurance industry.

Shepherd: You’re worried about mandating coverage for everyone.

Potter: I am worried about that, particularly if there is no public option. If you think about it, if you’re mandated to get coverage and if there is no alternative to the private insurance market, you will be required to buy some kind of policy from insurers who are overpricing their policies as it is. They build profit into those policy premiums. And we would all be required to buy them. The reason why most people don’t have insurance is because they can’t afford it or they’ve had some kind of illness that the insurance industry considers to be a pre-existing condition. Some people can’t get insurance at any price because of that. What you would find is people being forced to buy policies they can’t afford.

The only alternative would be for the government to subsidize the premiums they would have to pay. That would mean that your tax dollars and mine and everyone else’s would go toward paying those premiums, which would go directly to these insurance companies. To me, that is not right. It shouldn’t be that way.

Shepherd:Opponents say the free market is the best way to ensure that consumers have a choice of insurance options. Wouldn’t that work?

Potter:That’s what we have had for many years and it has not worked in health insurance, particularly with the industry having shifted from nonprofit to for-profit status. The main objective of these companies is to make money and to enrich shareholders. You can’t do that by insuring everyone who wants insurance. That’s why they’re kicking people off the rolls. The public option would actually increase choice. No one would be forced to go into a public plan. It would be an alternative if they wanted to choose it.

Shepherd: Why does the industry have so much influence on Capitol Hill? Is it merely money? Or is there more to it?

Potter: It’s money, it’s relationships, and it’s ideology. The industry has been working for many years to line up support in Congress for this very day. They knew [reform] would come around again. They have contributed millions and millions of dollars to lawmakers, in particular to Republicans, but also to Blue Dog Democrats. They have been building good will, if you will, on Capitol Hill for a long time and they have hired an army of lobbyists. It is an army of people who include former members of Congress and their staff members. That means they have easy access to the movers and shakers on Capitol Hill. And there’s ideology. They worked very diligently over the years to appeal to people in public office who share a free-market philosophy and try to persuade them to leave the industry as it is or enhance it to benefit the industry.

Shepherd: There’s a sense that the debate has gone out of control. How do we get the national conversation back on track?

Potter: The town halls were absolutely out of control. They were taken over by people who unwittingly are doing the work of the insurance industry. They may not be aware of that. I think what we really need to do is to try to get back to the facts, but to present them in a way that connects with people emotionally. That’s what the opponents of reform have done. I think the president and supporters of reform have to make sure that people know what this debate is about. It is about making sure that people who don’t have coverage have it and also helping this country have a better economy. We are becoming increasingly uncompetitive in the global marketplace because our businesses are not competitive.


To read Wendell Potter’s blog, go to www.prwatch.org. For more on Fighting Bob Fest, go to www.FightingBobFest.org.