On the surface, there was nothing unusual about the Oct. 6 telephone call between White House health-care boss Nancy-Ann DeParle and Karen Ignagni, the leading medical-insurance lobbyist in Washington. The two women have known each other for years and often speak several times a week. Though Ignagni's group, America's Health Insurance Plans (AHIP), has long been leery of and at other times downright hostile to the health-care bills moving through Congress, an uneasy truce was holding between the insurers and a White House bent on reform. But just barely: when DeParle and a Senate aide asked Ignagni during the call to confirm a rumor that her industry was about to release a report attacking the measure being prepared by Senator Max Baucus, DeParle recalls, "she said, 'No, we are miles away from putting out a report.'"
Five days later, Ignagni released an analysis by PricewaterhouseCoopers that claimed, on the basis of a misleading reading of the bill, that reform could lead to a painful spike in insurance premiums for ordinary Americans. The episode shattered the thin trust between the Administration and the insurance lobby and set the stage for an ugly and very public war over the shape of the final measure. "I feel completely misled," said the Senate aide who was on the call. "There are a couple of things you have to have in this town, and your good name is one of them."
The AHIP report was the kind of one-sided study that lobbyists sometimes commission to create scary sound bites. It worked. The report analyzed the impact of four narrow features of the Senate Finance bill using a worst-case-scenario model; it concluded, as Ignagni says, that "health care costs [would] increase far faster and higher than they would under the current system." A fairer reading of the bill, which cleared the Finance Committee on Oct. 13 with a 14-9 vote, with one Republican supporter, suggests these projected costs are wildly exaggerated. Other provisions of the bill are aimed at lowering insurance rates. But the legislation has not yet been fully analyzed by congressional bean counters, and it has so many unquantifiable parts that even some of its proponents admit that hard numbers are difficult to nail down. "It's impossible to figure out what the bottom-line impact is," says a Finance-panel aide.
Though the industry's alarmism failed to derail the Baucus bill, the struggle over health-care reform is far from over. The conversations between DeParle and Ignagni laid bare what is really at stake for the insurers as health-care reform has gained momentum. For example, both DeParle and the Senate aide claim Ignagni voiced serious concerns during the Oct. 6 call over a provision in the Senate Finance bill that would raise $600 million in new taxes on the salaries of high-paid insurance executives. DeParle also said that in a White House meeting the next day, Ignagni repeatedly suggested that she was getting pressure from insurance CEOs who were alarmed about a drop in their firms' stock prices since mid-September, in part resulting from grim forecasts by Wall Street analysts. "She said her CEOs were really up in arms," DeParle said. For her part, Ignagni denies that she ever told the White House not to expect a report, and says she never discussed taxes on CEO pay with any officials. She said DeParle raised the issue of Wall Street analysts. "I had two people that were with me," Ignagni added as corroboration. "They don't lie."
The dustup marks the end of the controversial White House strategy of keeping all the powerful industries playing nice during the months-long period of bill-drafting. But the insurance lobby's hard-line tactics may give President Obama and his aides a convenient foil just when critics on their left flank are mobilizing for more-dramatic reforms. If those more liberal lawmakers get their way, the insurers could take some more hits: on Oct. 14, Democratic New York Senator Chuck Schumer struck back by announcing that he wants to revoke health insurers' antitrust exemption. House Speaker Nancy Pelosi, who has called insurers "almost immoral," is talking about a windfall-profits tax on the industry. Which means the insurers and the White House could be back in touch before long. With reporting by Kate Pickert/New York