AHIP's move signals ACA acceptance

The decision last week to hire Marilyn Tavenner as CEO of America's Health Insurance Plans signals that the powerful lobbying group has accepted the Affordable Care Act as the new business environment and that it wants a CMS insider to help during the next phase of market development.

Her selection was criticized by many observers as an example of the revolving door between the federal government and the private sector, which creates potential conflicts of interest for government officials. But it will give the insurance group, which recently lost its biggest member and faces declining revenue, the opportunity to refresh its image and operations.

Tavenner, 64, a former hospital system executive, stepped down in February as CMS administrator. She succeeds the widely respected Karen Ignagni, AHIP's longtime CEO, who is leaving for EmblemHealth, a financially troubled not-for-profit health insurer in New York.

The group wanted a “high-profile” replacement for Ignagni, said Kip Piper, a Washington-based health insurance consultant. As a top Obama administration official overseeing Medicare, Medicaid and ACA implementation, “her government experience will be invaluable to AHIP given how rapidly the public sector is dominating the financial, market and regulatory facets of health plans,” Piper said.

Tavenner's appointment also signals the insurance industry's confidence that the ACA is here to stay following last month's U.S. Supreme Court ruling upholding the law's premium subsidies, experts said. Health plans want someone who can help them adapt to and benefit from the law. She also has solid ties to Republican leaders, which could help AHIP if Republicans win the White House in the 2016 election.

Under Ignagni, AHIP voiced support for the ACA and its key insurance provisions, including the individual mandate. But AHIP fiercely fought medical-loss ratios, Medicare Advantage cuts and other provisions that ate away at profits. The group played both sides of the fence, funding the U.S. Chamber of Commerce in opposing the law.

“The ACA is now business, whereas during its passage, it was seen as a threat by AHIP,” said Larry Jacobs, a political science and health policy professor at the University of Minnesota. “This (hire) is a signal change.”

Tavenner oversaw the botched rollout of the federal insurance exchange and the ACA-mandated cuts in payment rates to Medicare Advantage. Exchange plans and Advantage plans are two areas of significant growth for private insurers. Observers said that background made Tavenner—rather than a career lobbyist or a member of Congress—the smart choice for AHIP, whose members are increasingly shifting toward government-based programs.

“They hired her for her political connections inside the administration, inside the CMS bureaucracy and inside the congressional committees that regulate them,” said Tim LaPira, political science professor at James Madison University.

AHIP has been struggling financially and internally. The group's revenue has been on a sharp path downward in recent years. AHIP recorded $95 million in revenue for 2010, but that fell to $63 million in 2013, according to tax records.

Many of its members are also merging or buying competing plans, which could affect AHIP in hard-to-predict ways.

UnitedHealth Group, the nation's largest health insurer by revenue, left the trade group last month because it said its interests “are no longer best represented by AHIP.”

Jacobs said UnitedHealth's departure was significant, and it will be important for Tavenner to instill confidence in the group's other major members. That exit, however, “doesn't diminish the importance of AHIP,” Jacobs said.

Tavenner will have to go through a “cooling-off” period, meaning she can't personally lobby any Obama administration officials in the immediate future. But political science experts note that she may not register as a lobbyist at all because AHIP has an army of experienced lobbyists on staff. She'll be particularly valuable in knowing “which bureaucrat to call at CMS,” LaPira said.

Despite the short-term lobbying restrictions, Tavenner's move has created some unease. At CMS, she was the top regulator of Medicare, Medicaid and the exchange plans, and now she will be advocating for the insurers she formerly regulated.

Kevin Esterling, a political science professor at the University of California at Riverside, said there are positives and negatives for public policy from this type of move.

Tavenner will use her expertise and contacts to benefit a private industry group, but she also could help make the government's policies more effective and efficient through her advocacy efforts, he said.

Still, Jacobs questioned how such revolving-door moves affect the thinking of government officials. “You just have to wonder when she was in office, was there an inkling that this kind of job was in her future?” he said.