For the Sake of the People and His Presidency, Obama Shouldn't Let AHIP Win

President Obama can't afford to let insurance companies win in the health care fight for reasons related to the pure crass politics of power. Like it or not (and I strongly do not like it), Obama's health care strategy was to cut secret sweetheart deals with all the industry players in exchange for their active political support, pushing for reform. He reached an understanding with PhRMA, the hospital associations, and doctors’ lobbying groups, but reporting indicates that Obama, after spending nearly a year negotiating with health insurance companies to keep them at the table, was never able to reach a formal understanding (although this was not for a lack of trying).

AHIP chose a different path, which went around Obama. They actively whipped up opposition to reform and leaned on a handful of insurance industry-freindly senators to push for the changes they wanted. The insurance industry's strategy in the Senate proved very effective--they killed the public option, which was their top goal. Equally important, they made sure regulator enforcement had no federal oversight and was left to the state insurance commissioners, which AHIP knows they can buy off or out-gun. The lobbyists were even able to preserve the insurance industry's anti-trust exemption. They also managed many smaller, but still important, victories, like selling insurance outside the exchanges, multiple exchanges within a state, a stronger individual mandate, maintaining a rather large age rating 1:3, and making sure the CO-OP idea was crippled with restrictions. From a cold, calculating strategic point of view, AHIP made a smart move not cutting a deal with Obama.

Obama may let the insurance companies keep their victories because he is desperate to sign any bill, regardless how bad, “labeled health care reform.” But if Obama does let the insurers win, it will spell serious trouble for the next three (or seven) years he is in office. Letting AHIP get away with short circuiting his administration will dramatically undercut his raw power in Washington. Why would any industry try to cut a deal directly with Obama when they know they can get all they want by just buying off a few senators for a fraction of the cost? As big a giveaway as the PhRMA deal was, I bet they are currently asking themselves if they could have done much better going around Obama.

Politically, Obama and the Democrats would be smart to really stick it to the insurance companies. They are very unpopular--43% of Americans don't think reform goes far enough in regulating insurance companies. Striking back at insurers would be very popular with the base. More importantly for Obama, on a political level, he needs to punish those industries that did not cut a deal with him directly. His power is in jeopardy if industries come to the conclusion it is a better investment to deal directly with a handful of senators while ignoring the president. Getting tough on the insurance companies is not just good politics, but important to maintaining Obama's long-term power. The question is, will the desire to get a "win" at any cost result in serious and lasting negative consequences for Obama.