HH: I’ve got an old friend, Denny Weinberg, one of the most successful health insurance execs over the last 20 years, retired now. But I asked him if he’d come on and talk a little bit with me about these HHS regs. Denny, great to talk to you.
DW: Hi, Hugh. How are you?
HH: I’m tremendous. Would you give a brief, I know you don’t like to brag, but would you tell people about what you did at WellPoint, and how you know this business?
DW: Well, I spent about 25 years in the health insurance business first as a consultant. I came out in the late 80s, when what was then Blue Cross of California was on the verge of insolvency. And I ended up heading a team that turned the company around and created the company WellPoint, which is, as you know, now the largest health insurance plan in the United States.
HH: So you’re a founding director of WellPoint. So when you have an opinion on health insurance, you’re just not making this up for ideological reasons. It’s based upon what you knew and had to work through for the last quarter century.
DW: Yes, and you know, I’ve watched all of this craziness that’s evolved over the last few years, and I’ve tried to look at it through the lens of how can this really work in a real marketplace, because whether we like it or not, health benefits provided to employees is an entire industry, and it has to work.
HH: So with that in mind, I want to, before we go to Obamacare generally, I want to ask you, when the President announced on Friday that he understood that he couldn’t do what he was proposing to do to many religious institutions, including most Roman Catholic institutions, and therefore he was going to order health insurance companies to provide morning after pills, sterilization and contraception for free, what was your reaction upon hearing that?
DW: Well you know, this has been a steady drip, drip, death by a thousand cuts first at the state levels. The more moderate and liberal states have been trying to do this kind of stuff for years, because this kind of benefit has been regulated at the state level. And now, the federal government wants to either get into the act and take control of the same thing, or force states to all operate under the same model. So I’m not surprised when I read this stuff. I just shake my head and wonder what happened to the idea that an employer should be able to purchase what they want at a price that they’re willing to pay for the employees that they’re trying to attract?
HH: And I understand that part. But what I’m trying to get to is he says that it will pay for itself, and that therefore, it is free. Number one, if you’re walking around and you’re not employed by someone, you’re unemployed the day before you go to work, you do not have access to the morning after pill, sterilization or contraception for free. The next day, you go to work for the employer, and you enroll in their group coverage, and you do have access. That means the employer is paying for it somehow, doesn’t it?
DW: Of course, of course. And the stuff is not free. We make it sound like these are minimal costs. But these kinds of services are real. Prescription drugs of all kinds are real, and this in particular, contraceptive services, are used by a huge percentage of Americans. So the incidence rate is quite high. And insurance works best when people or companies contribute a very small amount of money for something that is not likely to occur like getting cancer, or having an auto accident. And so that small amount of money is spread over very expensive things that occur very infrequently. These kinds of services are used by a very large percentage of Americans. So they end up actually costing a surprisingly large amount of your health insurance premium.
HH: So what do you think will happen if this stands? And I don’t think it’s going to stand. I think it’s unconstitutional, and I think politically, it’s a nightmare, and I think the Supreme Court’s going to throw out Obamacare. But say I’m wrong on one, two, three. Three strikes and Hugh is out. And not only does it stand, it goes into effect. What do insurance companies do in terms of pricing? How do they deal with a mandate for a high demand, and sometimes, I think sterilization must be a few thousand dollars at least, on the least complicated cases?
DW: This drives companies absolutely crazy. You know, the idea is that we developed the actual science of what it costs to cover the health care needs of the human being. We studied that over many years. We get to understand these dynamics, and we have to set these premium rates sometimes a year and a half in advance. So when this kind of stuff comes out of nowhere, with very little notice, it almost guarantees that health insurance plans are going to be mispriced, and the insurer’s reaction to this kind of environment is I have to put additional risk charges into my premiums to cover all this unknown. So this is going to just cost employers a lot of money. And he can use the smoke and mirrors that somehow this is costing insurance companies but not costing employers, but we all know that’s silly.
HH: Boy, you just hit something that’s so important. They have to put additional risk premiums into their policies. Would you break that down for someone, because I think that is the key to understanding that nothing is free.
DW: Nothing is free, and the more uncertainty or volatility there is in an environment, the more an insurance company not only does it because it makes good sense, but they’re required by the statutory rules of their state to set aside extra money to cover the unknown. So the more volatility and uncertainty, the more of that kind of thing you find in your premium.
HH: Now Denny Weinberg, I want to ask you, I’m not ask you for a moral judgment. This is a business judgment. Put aside whatever your views are on abortion. If the President has the authority to mandate that every health insurance carrier in America provides sterilization and the morning after pill, doesn’t it follow that he has the authority to order abortion?
DW: Yes, and of course, that’s another slippery slope that we’ve been fighting with the states on for years, because some states have already gotten there. And but for the states who have held out on that, we’ve avoided a national mandate on that. So once the President says well, it’s a natural extension that let’s package this in a nice, clean package called women’s health or something, which has great cache, the next thing you know, we find that our rights and our ability to protect our very closely held religious beliefs are compromised over, just like they will be over this, if this goes through.
HH: You see, because there is actually no theological distinction between the morning after pill and an early abortion, pre-viability. There just isn’t. There is none, and therefore, I don’t know how anyone can object or not object based upon the agency by which that pregnancy is terminated. But that’s a different issue. I’m looking at the insurance thing at this point. Then, if he can order abortion, why can’t he order artificial knees for all? When does it stop?
DW: Well, and especially when they start trying to tuck this into this notion that for example, in the case you just gave, maybe an abortion is cheaper than a full term delivery. And suddenly, you’ve got this ridiculous argument which was used like contraception, that somehow the cost of providing contraception is cheaper than the cost of a pregnancy and a delivery. You’ve got this rhetoric that comes across as business-ese, which is just cover for a social agenda.
HH: Well, I can make a point. Anyone who knows me will say it is much better for the country to have Hugh Hewitt wearing glasses than not wearing glasses. And my productivity is endlessly better, and I’m not a danger to anyone. Why aren’t my glasses free, Denny? I mean, it doesn’t make any sense at all.
DW: Well, because there is no free lunch. I mean, free is not free. You heard the, to coin a phrase, that if you think health care is expensive now, wait until it’s free.
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HH: Denny, I know for a fact that at least one of the justices listens to this radio show, and maybe more as they’re driving home. And the radio station in D.C. is WRC 1260. So let’s assume for a moment that we’ve got a majority of them driving home tonight. What do you want them to know about what Obamacare has done to the industry that you helped build?
DW: That the more government has intruded on the market of health financing, that fewer options have resulted for buyers, both employers and individuals, and the higher the costs have gone. It is just the case. It has been so much, it is probably so much more difficult for these insurers to meet these “basic benefit plans” and the cockamamie pricing schemes than it would be for them to simply serve employers and individual purchasers, and compete with each other on the basis of what is real price and quality like any other market works. This was evidenced years ago when you would compare the more regulated states like New York, to relatively unregulated states like Texas, and back then, believe it or not, California. And almost time after time after time, the less regulated states had more options, more competitors, better plans, and lower prices.
HH: And so when you talk to your colleagues who have stayed in the business after you retired, what do they say about day to day, week to week, month to month life under Obamacare?
DW: They spend most of their time dealing with compliance issues. And you know, the idea that you can, that they can meet the needs of customers, which is really what they’re all about, is completely…
HH: So Denny, in terms of what happens if Obamacare is struck down, is that better for the industry? Or is it just more uncertainty and leading to, as we talked about last segment, higher risk premiums?
DW: The problem right now is that Obamacare was implemented in stages. And it’s a question of what does repeal really mean? Because we are completely half-pregnant, and these insurers have had to comply with not only the direct mandates of Obamacare, but enormous amounts of state law and state regulation that had to be passed in order to continue regulating these plans at the state level. So it’s hard to imagine what the process of repeal would be for an insurer, but it would be a lot of work just to undo this and try and put things back to some semblance to the way they were. That is what’s so sad about this.
HH: Now…but in terms of the mandate itself, if the Supreme Court will have one of three choices – leave it alone, strike down the individual mandate, or strike down the entire law on a technical term called non-severability. Which would you prefer if you could forget what the Constitution said, you’re just a health care exec, and you want the best thing for your company and the people that you insure?
DW: I would want it completely struck down. The loss of…striking down the individual mandate itself leaves an untenable set of laws that would just unwind everything. And we would end up with people who are the most in need of care purchasing health insurance, and those who are not waiting until they do. And that’s just not workable.
HH: Now to the justice who’s driving around and listening to this, and perhaps a few of them, and I’m going to ask this to be transcribed as well, because I want them to read this, the people will say in the Court in front of them in a few weeks, they’ll all be lawyers talking about medicine, which is always amusing to me, that the future of American medicine is going to be decided by two teams of lawyers talking to nine lawyers. Isn’t that scary, Denny?
DW: It’s quite scary.
HH: Okay, so how little do they know about this business?
DW: Well remember, it’s not just the business of heath care. It’s the business of health care financing.
DW: And this is not something that evolved overnight. You can go back to its genesis in the life insurance business, which is 150 years old. There’s been a lot learned about how do you finance large populations of people, and acute, unexpected needs. And the idea that a bunch of lawmakers in there part time can be advised by their staff and their counsel on how to manage this on a day to day basis is just, you know, well, it’s, on its surface, you can tell it is what it appears.
HH: Key exit question. 30 years from now, if the law stands or if the law falls, how different will the American medical system be, health care system under those two scenarios?
DW: I think it’ll be dramatically different. We are working our way towards a medical system that is defined by a few hundred people in Washington, D.C versus a set of medical services that are defined by those who use those services throughout the country.
HH: Denny Weinberg, thank you so much for spending time with me. That was probably the best two segments I’ve had on Obamacare and the HHS regs ever.
End of interview.