AIG Investment Could Conflict With Plans for Health Care Reform

The U.S. government's $150 billion commitment to American International Group, along with its 80 percent stake in the company, could put the White House in a difficult spot when it comes to enacting health care reforms that would put pressure on companies like the giant insurer.

President Obama vowed during the campaign to "take on" insurance companies, accusing them of cherry-picking healthy patients and leaving the rest to fend for themselves.

"We'll ... hold them accountable for the prices they charge and the harm they cause," Obama declared in October.

But four months later, the tight relationship between AIG and the government means financial pressures on both.

Leonard Rodberg, a research director at Physicians for a National Health Program, said the administration will be setting itself up to lose money if it seeks to halt the "cherry-picking" and requires companies to cover pre-existing conditions regardless of health history.

"If there's no pre-existing conditions, they'll end up taking people who are sick, and they don't make money that way," Rodberg said.

Rodberg, whose group advocates a far more drastic health care overhaul than the administration, has doubts about how far the White House will go in putting pressure on the insurance industry. But he said investing in AIG creates a disincentive for exposing such companies to more risk.

The Wall Street Journal reported Tuesday that AIG is in talks with the administration to ease the terms of its  bailout agreement. The article said AIG was planning to report a total loss topping $60 billion for the last quarter, and that the company wants to repay some its debt by transferring assets to the government.

AIG issued a brief statement saying it has not yet reported its fourth-quarter results and will provide a "complete update" soon.

"We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges," the statement said.

The administration's health care efforts already took a hit when Tom Daschle, the former Senate majority leader tapped to lead the Department of Health and Human Services and the new White House Office of Health Reform, withdrew his name over tax problems.

But government investment in the insurance industry has rattled some health care advocates.

"It looks like the government is not interested in creating a system that would put health first," said Katie Robbins, whose group Healthcare-NOW! also calls for moving away from a private insurance system entirely. "It sort of looks like we would be continuing the policies of the private plans that have very serious flaws."

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said the government's financial footprint in the health care industry is minimal, and that AIG does not specialize in health care anyway.

Obama has tried to spread the burden of his health care proposals across several sectors, rather than put the squeeze solely on insurers.

The administration wants to increase competition in the insurance market, require companies to take on clients with pre-existing conditions and create a new public plan, which some in the insurance industry fear will pose added pressure.

Zirkelbach had no comment on how the government's AIG investment could impact Obama's health care plan, but he said his organization has lingering concerns about how a new public plan could exacerbate existing underpayment problems with Medicaid and Medicare.

The administration also wants employers to contribute more to employees' health care plans. And it wants to lower drug costs as well as create new tax credits for both employees and employers.

Obama re-committed his administration to addressing health care at his Fiscal Responsibility Summit Monday at the White House. He said fixing health care is critical to balancing the federal budget -- currently burdened by commitments to companies like AIG.

"Over the longer run, putting America on a sustainable fiscal course will require addressing health care," the president said. "It's a challenge that impacts businesses, workers and families alike."

Obama said participants at the summit -- 130 lawmakers, administration officials and other "community leaders and stakeholders" -- agreed to try to tackle the problem this year.

"I think that offers extraordinary promise, although peril, as well," Obama said.