By Associated Press Writer
updated 8/14/2009 2:05:40 PM ET 2009-08-14T18:05:40

Cast as a profit-hoarding villain by Democratic foes, the insurance industry still has a fighting chance to fend off the part of health care overhaul it most despises — creation of a government-run plan to compete with private insurers.

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Industry lobbyists are using influential allies, a thick wallet and a strategy of avoiding blatant confrontation to block or weaken the proposal, which Democrats say would drive down costs by offering an alternative to private companies. Insurers and Republicans say a federal program, a cornerstone of President Barack Obama's proposal, would drive many firms out of business.

With Congress' work on health legislation at a crawl, Democrats looking to spark popular support have rechristened their drive "health insurance reform" and hurled epithets at an industry that polls show isn't trusted. House Speaker Nancy Pelosi, D-Calif., labeled them "villains" while Obama cited "abuses" and "record profits" — even though top health insurers saw their annual profits fall in 2008.

"The American people understand that the status quo would work very well for insurance companies. It doesn't always work well for them," White House adviser David Axelrod said Thursday in its latest salvo.

Earlier in the week, Senate Finance Committee Chairman Max Baucus, D-Mont., said polling shows "it becomes quite popular" when Democrats explain the overhaul will curb insurance companies.

Vague support by industry
Though some conservatives and industry officials say insurers should fire back aggressively, the industry lobby has so far resisted and stuck to its mantra that it supports a vaguely described bipartisan overhaul. That is in contrast to its lead role in killing President Bill Clinton's health care overhaul effort of 1993 and 1994.

"We're staying on our strategy of being clear that we're supportive of reform" while opposing a government plan, said Alissa Fox, senior vice president for policy of the Blue Cross and Blue Shield Association. "We don't want this to be about us, or them."

Industry opposition is one reason why, as lawmakers' August recess begins, Democrats still don't know if they will be able to push a robust public insurance plan through Congress later this year. While three congressional committees have approved optional government coverage, the House Energy and Commerce panel has voted to limit its version and Senate Finance leaders are considering nonprofit co-ops instead.

"They've been effective in constraining what the public plan might become," said Len Nichols, who directs health programs for the nonpartisan New America Foundation. Crediting insurers' less contentious strategy, he added, "I don't think they're suddenly nice. I think they've figured out it's in their interests to do this."

Insurers have maintained clout, in part, by offering to ease unpopular policies like denying coverage to the sick — in exchange for legislation requiring almost everyone to have a medical policy, thus creating millions of new customers. The industry's main trade group, America's Health Insurance Plans, is airing a multimillion-dollar ad campaign on national cable TV backing a bipartisan overhaul and stating that if everyone is covered, "the words 'pre-existing condition' become a thing of the past."

Big campaign contributors
Health insurers have lavished $41 million in campaign contributions on current members of Congress since 1989, with more than half going to lawmakers on the five House and Senate panels writing this year's health bills, according to the nonpartisan Center for Responsive Politics. Since the beginning of 2008 alone, they have spent $145 million on lobbying, led by Blue Cross-Blue Shield organizations and the AHIP trade group.

The insurers' lobbying and campaign contributions are a fraction of what is spent by some other industries. Even so, the expenditures are enough to give them muscle and access and to hire armies of insiders from both parties, like Kenneth Duberstein, who was an aide to President Ronald Reagan, and Steven Elmendorf, who worked for House Democratic leader Richard Gephardt, D-Mo.

Powerful foes
The industry is helped by powerful allies who oppose a public plan, including health care providers like hospitals, who are major employers in many congressional districts. Also against are the U.S. Chamber of Commerce and local insurance brokers, who hail from home towns across the country and sent 1,100 insurance agents to meetings in 468 congressional offices last month.

Opposition from rural hospitals and local businesses led many fiscally conservative House Democrats, dubbed the Blue Dogs, to force House leaders to water down the public plan in a compromise last week.

Hospitals and doctors, who wield huge lobbying and campaign contribution accounts, fear a public plan would underpay them, while businesses worry they'd be left paying higher taxes and insuring the oldest, frailest workers. Republicans and conservatives, solidly opposed, have labeled the public plan socialism or a government takeover of health care.

At the helm of the industry's fight has been Karen Ignagni, a former AFL-CIO official and Democratic Senate aide who heads AHIP. Ignagni, who has visited the White House at least four times this year, told reporters opponents' efforts to "demonize" her industry were "a major step backward," and suggested that Democrats actually want to replace private insurers with government coverage — which Obama and others have denied.

Complaints of weak response
Even so, internal complaints are growing that the industry response has been too weak, underscoring the pressure that Democratic criticism is putting on insurers.

"They're spineless," said John Goodman, who heads the conservative National Center for Policy Analysis. "That's easy for me to say because politicians can't regulate me out of business, but they think they're vulnerable."

"They're getting beat up big-time," said Robert Rusbuldt, president of the Independent Insurance Agents and Brokers of America, representing private agents and brokers. "I think they're being timid."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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