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.

It’s hard to believe that not only are we drawing close to the end of another year, but also closing in on the end of the first decade of the Third Millennium. 

(I already expect to hear from pedants and calendar officials informing me that in strict terms a decade goes from a year beginning with the number one, not zero.  Then I expect to hear from some people telling me that zero is not a number.  But most of you will know what I mean, and the others will just have to deal with it.)

(By the way, these same folks are very likely the ones who are still preoccupied with what to call the decade now about to end.  My own suggestion (considering the tenor of most of those 10 years) would be the Naughties.)

In any case (and to get back to life outside the parentheses) it’s been quite a year, hasn’t it?  

For many people it will be the equivalent of Queen Elizabeth II’s annus horribilis, 1992, and not because two of their sons’ marriages went bust and one of their castles caught on fire, to cite some of the royal disasters of that year that caused Her Majesty so much distress.

Rather many will remember 2009 as a horrible year because of more mundane reasons. They lost their job and couldn’t find another one.  Or their house (castle) went into foreclosure.  Or their retirement funds, once so safely (or so it seemed) parked in a 401(k) had managed to recoup only a small percentage of the 40% or 50% they had lost when the market went into free fall. Or because they were in sales (including insurance products, of course) and every day was more of an uphill climb than it usually is due to the fact that consumers all over the place were holding on to (not to mention squeezing hard) their depleted shekels.

And on that subject, the first six months of 2009 will be (bitterly) remembered as the time when sales of insurance products saw their steepest decline in nearly 70 years, according to LIMRA International.

Things may have started to pick up in a couple of lines, however.  So, in a time when looking for good news is the equivalent of grasping for straws, then the uptick in whole life sales (which account for a thin sliver of the market) is something worth celebrating.

We could also, I suppose, take cheer from the fact that economists are declaring that the recession officially over.  But the response of many non-economists to that claim is: Really?

The danger in trumpeting the macro view in something like this is that it stretches the disconnect between what people feel in the own lives and what they hear from those who see the “big picture” or who have a stake in pushing the rose-colored view of things that the macro view encourages.  (President Obama, take note.)

Needless to say, the widespread pain has made sales of insurance products ever so much more difficult.  The ‘intangible’ thing combined with the depletion of discretionary income has taken a toll on producers and companies alike.

All of which makes it imperative for both producers and companies to keep plugging away and using this time of trouble to reinforce the message of the security that insurance products provide.  Even if sales of those products come later.  

The reality is that these tough times will pass, although not as quickly as we would surely like.  But if producers and companies don’t stay on message now, they will have to compete with a myriad of consumer preoccupations later on (like looking for the best HDTV).

So many consumers are still very scared and want to hear about security. And that’s whether they can pay for it now or not.