What is it about this business?

A few weeks ago, I wrote a piece called ‘Tone Deaf,’ which spoke to the health insurance industry’s propensity for shooting itself in the foot, with ever more powerful weapons as time goes on.

That was before the health care reform bill was enacted into law.

But no sooner had the bill been signed by President Obama than health insurers were looking for loopholes to avoid complying with some provisions. 

So, of course, the one that gained the most notoriety had to do with insurers parsing the bill’s fine print and coming up with a justification for not insuring some kids with pre-existing conditions until 2014. 

Despite what the fine print may say and however finely one may parse it, it is obvious what the law’s spirit is for insuring children with pre-existing conditions—that is to say, this is to start in September.  It’s obviously what the bill’s writers meant and what the President had been trumpeting as a major immediate benefit of the bill.

Why, then, of all possible provisions in a 2,000+-page law do health insurers pick this one upon which to make their first play?  Is this business so hopelessly addicted to being considered the bad guy that it has become a self-fulfilling prophecy?   Or is it the thrill of seeing how far it can go?  Or does it get off on the anger such moves engender?

The responses can get pretty angry.

Here’s what Sen. John D. Rockefeller IV, D-W.Va., had to say: “The ink has not yet dried on the health care reform bill, and already some deplorable health insurance companies are trying to duck away from covering children with pre-existing conditions. This is outrageous.”

Another statement had him using the word ‘reprehensible.’

Kathleen Sebelius, Health and Human Services Secretary, wrote to Karen Ignagni, president of America’s Health Insurance Plans, that health insurers should stop looking for “non-existent loopholes.”  Sebelius also said she would be she would be issuing regulations in coming weeks that would clarify that “the term ‘pre-existing condition exclusion’ applies to both a child’s access to plan and to his or her benefits once he or she is in the plan.”

To cause such a needless stir, we must be talking about millions of kids, right?  Well, not exactly. 

According to the Wall Street Journal (and since it appeared in the Journal even the industry’s staunchest defenders will accept it as gospel), the figure is 1% to 2% of the estimated 8 million uninsured children—that is, 80,000 to 160,000 kids.

In referring to these numbers, the Journal quoted Sara Rosenbaum, chairwoman of the health policy department at George Washington University, as saying: “We’re talking nationwide about a handful of children…I can’t imagine why insurance companies are fighting this so hard.”

As the pressure grew, insurers saw the light.  An AHIP spokesman said, “We understand policymakers are contemplating changes to the provisions related to coverage for children, and we will implement any revisions that are made.”

Couldn’t somebody have thought of this before the lawyers got their fangs into the bill?  And if not, why not? 

Hey, Dr. Phil, do you ever take entire industries as subjects on your show?  The health insurance business needs help and while it’s true the business is not a kid, it sure has a pre-existing condition.

What, you might ask yourself, would cause a health insurance company coming off a quarter where it had multi-billion dollar profits to slam individual policyholders with rate increases up to 39%?

Well, let’s see. 

Maybe the insurer is headquartered on Mars and is unaware that a debate to reform the health care system has been raging in the United States for the past year.  And maybe this insurer was unaware that this debate has witnessed health insurers taking more than their share of abuse.

Or maybe the insurer is headquartered in the U.S. but is in need of a gigantic corporate hearing aid to assist in overcoming a massive condition of tone deafness.

Or maybe the insurer is just plain arrogant and doesn’t give a hoot about how this plays out in the larger world.

OK, maybe it’s none of these.  Maybe there were good reasons for the move and let’s concede them all.  So, concede the point that those billions in profit were largely a one-shot deal arising from a sale of a business.

And concede that the state’s regulations and the recession were causing the insurer to lose money on its individual business.  And concede that medical costs are skyrocketing, leaving premiums breathless to catch up in many cases.

Even with all those valid reasons, I still have to ask what the impulse is that causes one to offer up oneself as a piñata.  For surely, the company, no matter how tone deaf, had to have had some inkling of the uproar its pricing actions would cause.

After experiencing a year of hearing insurers railed at for unrestrained increases in premiums that are crushing businesses and consumers, how on earth do you go ahead and up the ante for some customers by 39%?

Was the company really clueless enough to expect that politicians would pass up the opportunity to relaunch a crusade that was showing signs of flagging?  Do lions pass up a nice big chunk of red meat when it’s thrown their way?

So, here’s my advice to the CEO of the company.  Don’t blame your actuaries, who I’m sure had very good reasons for justifying these increases.  Do blame your PR people—they’re paid to know better and they let you down grievously.   

And do take some of the blame yourself.  You could have had enough courage to tell your shareholders that this was just not the time to become a poster child for the excesses of the health insurance business.

I certainly hope the rest of the business will take note of what happened here.  But it does make you wonder whether tone deafness has become so persistent a condition that insurers have stopped listening.

My blood started boiling as I read a Dec. 15  article in the New York Times  coming in to work about how executives of three large banks—Goldman Sachs, Morgan Stanley and Citigroup–did not show up at the White House for a meeting with President Obama that was to deal with getting these institutions to make more loans to small businesses and consumers.

Their excuse?  Bad weather prevented their flights from getting to Washington from New York on Dec. 14.

So, they had to participate in the hour-long meeting by speaker phone.  This is one case where you can literally say “they phoned it in.”

A year ago, these same banks were all too anxious to get to Washington because that was where the money was that would pull their butts out of the disaster they had created through their risk-taking folly.

Now, however, that they seem to be on a sounder financial footing, and have paid back the bailout funds that were so constricting their bonus and compensation schemes, they let some fog or otherwise inclement weather interfere with meeting with the president.

I ask you, if you knew you were supposed to meet with the president on a Monday morning, wouldn’t you have enough sense as the CEO of a multi-billion dollar institution to check what the weather was supposed to be and, if forecast was poor, go to D.C. the day before?   And if you were too busy as said CEO to do so yourself, couldn’t one of your assistants have done it?

But perhaps you were too busy either counting your expected compensation (since your bank was no longer under TARP restrictions) or bemoaning the fact the public outrage had forced you to forego a cash bonus in favor of stock.

This episode, along with the year-long dithering that has just seen the House pass a financial services reform bill and is still waiting for something to emerge in the Senate, makes me believe that not only has nothing changed, but that thing have actually gotten worse.

It is no secret that the banks that took bailout money last year were in a rush to pay it back because of the salary and bonus restrictions for executives that came with the bailout funds.

Some of these banks are stronger than others and could very well be in a position where they could justifiably pay back the money they owed and then some.  

But it is also no secret that some of these banks, such as Citigroup and Bank of America, are in not in a position to do this.  Nonetheless, the Treasury Department has given its approval to every one of the banks that have said they intend to pay back what they owe because they’re strong enough.

Some banks have raised the money to pay back the funds by issuing stock, others through trading profits.  In any case, many analysts have grave doubts about the condition of some of these mega-monsters.  There is still a lot of garbage on their balance sheets that has not seen the light of day but will have to be accounted for in terms of massive losses, probably sometime next year.  Apparently these doubts don’t extend to anyone in charge at Treasury.

There’s been no twisting of arms that I can see.  And further, these banks know that should they approach the brink again, Treasury is there for them, wouldn’t dare to let them fail.

It really is past time for Treasury to get out of bed with Wall Street and start thinking about the rest of us.  And if some bankers sticking their fingers in the president’s eye won’t do it, what will?