The Magazine

The Sebelius Coverup

Obamacare’s insurance exchanges need scrutiny.

Dec 10, 2012, Vol. 18, No. 13 • By JEFFREY H. ANDERSON
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The Hill writes that the “quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.” The Hill adds, “One critic familiar with the business rivalries of the insurance industry compared UnitedHealth Group’s purchase of QSSI to the New York Yankees hiring the American League’s umpires.” In other words, UnitedHealth Group, through QSSI, would be able to police the same field in which it would be a competitor.

In addition, QSSI would have access to valuable data. The Obama administration likes to compare Obamacare’s prospective insurance exchanges to websites like Travelocity and Expedia, but the comparison is inapt. Travelocity and Expedia don’t regulate airlines, stipulate the length of runways, or transfer money from younger passengers to older ones. In truth, Obamacare’s federal exchanges will be an extremely complicated technical endeavor to set up and run, as (among other things) they would involve compiling massive amounts of risk-selection data on individual Americans. In addition to raising extraordinary privacy concerns, the data involved would be like gold to insurers. To quote my source, “If you can capture this data, you’re going to win.”

 

When HHS became aware of UnitedHealth Group’s purchase of QSSI, it couldn’t realistically void the contract, because the Obama administration was already too far behind in setting up the federal exchanges. To void the contract would mean delaying the exchanges’ implementation by many more months. The Hill writes: “[G]iven how late the administration has been in issuing rules for the exchanges, it would be extremely difficult to void a key contract, find another company to perform the work and still meet the 2014 deadline.”

Unwilling to void the contract, HHS instead went to work on setting up a firewall designed to block United-Health Group from gaining access to QSSI’s data, presumably out of a desire to keep UnitedHealth Group from gaining an unfair advantage. Then, likely in concert with the White House — and to the chagrin of many HHS employees — Sebelius and other senior HHS officials decided that word could too easily get out about the firewall project. If it did, it would alert people to UnitedHealth Group’s having gained a potentially huge competitive advantage — a political concern for the White House on the cusp of the election, especially in light of the crony capitalism charges that have plagued this administration. Therefore, HHS, under Sebelius’s leadership, suspended work on the firewall and told United-Health Group not to alert the SEC to the purchase — as UnitedHealth Group was legally required to do within four days of the transaction — until after the election.

HHS’s actions have drawn the attention of the Senate Finance Committee. The committee’s ranking Republican, Sen. Orrin Hatch, has asked Sebelius for information, but Sebelius has not complied with his written requests and deadlines. 

Prior to the election, most reporters — or their editors — weren’t interested in looking into any of this too closely. But in the wake of the refusal of elected GOP leaders in the states to do the Obama administration’s bidding on Obamacare, the development of the federal Obamacare exchanges might now receive closer examination. The idea of funneling about $1 trillion (according to the Congressional Budget Office) over Obamacare’s real first dozen years (2014-25) from American taxpayers, through Washington, to private insurance companies was always problematic. But it’s more problematic to hire a subsidiary of one of those insurance companies as an architect and policeman of the exchanges through which the Obama administration intends to have this abundant taxpayer money flow, more problematic still that Obama’s first head of the CCIIO may have profited personally from the venture, and most problematic of all that HHS may have told a private company to violate federal securities law in order to aid Obama’s reelection prospects.

Is this really the sort of “reform” of the American health care system that anyone wants?

 

 

Jeffrey H. Anderson is a senior fellow at the Pacific Research Institute.

 

 

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