CNBC Guest Blog

Published: Tuesday, 13 Oct 2009 | 2:24 PM ET

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Julie Roginsky
CNBC Contributer

When the etymology of the word “chutzpah” is recorded, Karen Ignagni, who heads the American Health Insurance Plans industry group, will surely earn an honorable mention.  On the eve of the Senate Finance Committee’s vote to reform health care, AHIP released a report claiming that committee’s legislation will raise premiums on the average family by thousands of dollars.  As AHIP knows, the Senate Finance Committee’s legislation has many laudable components but what it doesn’t have is a public option.

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Welcome to the debate, Ms. Ignani. Where’ve you been hiding?

AHIP speaks for the interests of major health insurance players, such as Aetna

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[  Loading...      ()   ], whose CEO earned $24 million last year; Cigna

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[  Loading...      ()   ], whose CEO earned $12.2 million last year; and Wellpoint

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[  Loading...      ()   ], whose CEO earned $9.8 million last year.   Ms. Ignani isn’t wrong when she claims legislation under consideration in the Senate Finance Committee has the potential to allow insurance companies to gauge consumers even more than they do now. Surely consumers can’t expect insurance company CEOs to take a small haircut so that life-saving coverage can be expanded for those who need it most.  The horror!

AHIP’s belated offensive against the Senate Finance Committee’s health care plan does raise an important point.  Without a public option to hold insurance companies accountable, there is very little to prevent AHIP’s doomsday scenario from coming to fruition. 

In most states today, one or two massive health insurance conglomerates control the entire market. Competition is scarce, where it is available at all.  Most of the insurers who are part of this oligopoly are for-profit entities, whose business model is – quite obviously – to turn a profit.  That is a cornerstone of the capitalist system and is as it should be for most industries.  For an industry that literally has say over life and death, however, the rules should be slightly different.

For health insurers, profit motive depends on spending as little as possible to treat illnesses in order to reap the greatest profit. Those multi-million dollar pay packages for CEOs don’t just grow on trees, after all.  They come out of profits gleaned from consumers.  The less they pay out, the more they take in. And the lack of competition in most states doesn’t exactly allow for comparison-shopping.

Supporters of the public option actually owe Ms. Ignani and AHIP a debt of gratitude.  In their own chutzpah-laden way, they have ably demonstrated exactly why a non-profit entity needs to exist in order to truly force a competitive system that creates an affordable market place for health insurance consumers. 

Thanks for playing, Ms. Ignani.  The CEOs whose companies you represent not be pleased with your report in the long run but you raise an excellent point about need for a public option to keep your industry honest.

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Julie Roginsky is a CNBC contributor who has extensive experience in government, politics and public relations on both the federal and state levels including serving as the Washington communications director for former Senator Jon Corzine.

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