Insurers Stop Playing Nice on Health Reform: Today's Outrage

NEW YORK (TheStreet) -- It was only a matter of time before the insurance industry broke ranks with the government on health reform.

That time has come.

Until now, the insurers have worked with President Obama and leaders of Congress to help draft new health care legislation, but now they've taken a dislike for the direction things are going.

They are basing their dissent on a report by PricewaterhouseCoopers showing that emerging language in the draft Senate proposal will increase the health insurance costs for the average American by hundreds, possibly thousands, of dollars a year, according to the Associated Press.

That's a solid rallying cry that could help the insurers gain sway. It sounds like they are taking a stand for Americans everywhere. It is, in fact, an argument to maintain the status quo that insurers enjoy.

Government leaders know this, having lost a previous health reform battle with insurers when former President Bill Clinton tried to push through universal care. That's why they've been dancing with the insurers this time around. Apparently, though, Senate leaders stepped on some toes. Quite a lot of them.

The insurance group leading the attacks is called America's Health Insurance Plans, which represents 1,300 insurance companies. The AHIP Web site includes links to Aetna(AET Quote), Aflac(AFL Quote), a host of BlueCross and BlueShield companies, Cigna(CI Quote), Kaiser, WellCare(WCG Quote), WellPoint(WLP Quote), UnitedHealth(UNH Quote), and most other major insurers.

Members of this group have much to be worried about in the current initiative, which would require them to take all applicants regardless of pre-existing conditions and would set up a government plan as an alternative to private coverage.

That was fine when there were strict provisions requiring every American to obtain coverage one way or another.

The insurance industry's concern, bolstered by the PWC report, is that draft legislation doesn't provide enough penalties for failing to get insurance. The lucrative market for premium coverage also gets hammered by a proposed tax on high-cost insurance plans.