How the American Legislative Exchange Council turned health care repeal into a national wave

By | 10.12.10 | 2:00 pm

(Pic by a.drian)

In early August, an obscure measure called Proposition C — which prohibits the government from mandating the purchase of health insurance — passed overwhelmingly in a Missouri referendum and soon became national news. While seen by many legal scholars as a largely symbolic act of defiance, the new statute will likely lead to yet another legal showdown over the implementation of the Affordable Care Act, and was seized upon by conservatives as a sign of growing disillusionment with the president’s agenda.

When the White House tried to downplay the measure as a “vote of no legal significance in the midst of heavy Republican primaries,” Sen. John Cornyn, R-Texas, used the response as further evidence that the Obama Administration is out of touch with the American people. “This sheer arrogance and political tone deafness from the Obama White House is simply astounding,” the senator said in a statement. “Their disregard for the votes that were cast by 667,000 Missourians as ‘nothing’ is startling.”

But was Proposition C a spontaneous show of grassroots discontent or a carefully orchestrated political ploy? Clouding the picture is the close involvement of a group called the American Legislative Exchange Council (ALEC), a conservative 501(c)(3) nonprofit that brings together state legislators and representatives of major industries to craft “model legislation,” including an item called the Freedom of Choice in Health Care Act, upon which Proposition C was based. Missouri state Sen. Jane Cunningham, who sponsored the legislation to refer Proposition C to the ballot, serves as an ALEC board member, and state legislatures in Arizona and Oklahoma, which have referred similar bills to the ballot for November, also enjoyed the support of ALEC-affiliated state representatives.

“What ALEC does is they’ll get members to simply announce they’ll introduce the legislation and then claim they have a national grassroots movement of 40 states opposing health care reform,” says Charles Monaco of the Progressive States Network, which works on progressive legislation at the state level. “Industry groups saw early on that the mandate would be the place to hit comprehensive reform because it was one of the least popular aspects of the law to voters, even though it’s one of the provisions that will benefit [industry] the most.”

There are conflicting accounts of how the measure came to be introduced in 38 state legislatures, and enacted in six. One side will tell you that the health care industry — particularly the pharmaceutical companies that sit on ALEC’s Health and Human Services task force — is taking potshots at reform by manipulating state representatives; the other describes grassroots anger bubbling up to the attention of legislators. Both contain a measure of truth. Told together, they provide a window into how groups like ALEC, which are obliged by tax law to work for charitable — not private — purposes, nonetheless exercise influence on behalf of private industry over statehouses across the country.

The story of the Freedom of Choice in Health Care Act starts in Arizona, with a lone doctor who decided he’d look into health care reform “as a hobby” and never imagined his ideas would go so far.

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Dr. Eric Novack, an orthopedist from the Phoenix area, claims he was never too interested in politics until a number of state governments turned their attention to reforming the health care system around the middle of the last decade.

“We need health care reform, but seeing where the winds were blowing I felt we also needed some basic protections for patients and families to ensure that it’s kept out of the hands of politicians, their cronies who can lobby them and these so-called ‘experts,’” Novack says.

In 2006, he teamed up with Dr. Jeffrey Singer, a surgeon and expert at the conservative Goldwater Institute, to craft a state ballot proposition designed to preserve the right of patients to purchase health care directly (which did not appear to be threatened) and to prevent the state from mandating the purchase of health insurance (as then-governor Mitt Romney, R, had just done as part of Massachusetts’ comprehensive reform plan).

“They got the measure on the ballot in 2008,” says state Rep. Nancy Barto, R-Ariz., who would later reintroduce a reworked version of the proposition in the legislature. “It took them a couple years and a lot of funds and signatures to get it on the ballot. They were outspent by a measure of five to one but still lost by only 8,500 votes.”

It was at this point in late 2008 that ALEC took notice, says Barto, who regularly attends the group’s conferences.

“Their legislation is patterned after our language in 2008,” she explains. “They called and asked about it, took our language and put it on their website as model legislation and saw we were getting real traction and started using it in their state conferences. In 2009, [ALEC HHS Task Force Director Christie] Herrera came and spoke at our Health and Human Services committee meeting in Arizona when we were moving the bill. She came and testified.”

Even before Herrera came and spoke on her bill’s behalf, however, Barto was thrilled when ALEC officially adopted the Arizona proposition as model legislation in December 2008.

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When asked about the role representatives of the pharmaceuticals industry, which holds three of the seven seats on ALEC’s HHS task force, played in promoting the bill, Novack insists that it became model legislation, if anything, in spite of their opinion.

“From what I heard it managed to get through because no one paid it any attention,” says Novack. “When people start and work backwards and look at who provides money to ALEC they think it was that the health care industry [that’s behind the model legislation], but it was more an issue of insignificance to them, and if they’d recognized that it’d be sweeping the country, then it’d probably not be sweeping the country. I mean, the major health insurers are the major backers of mandates!”

But since ALEC adopted model legislation for the Freedom of Choice in Health Care Act, the group has played a key role in trumpeting iterations of the bill in various states over the past year. ALEC’s Herrera has offered guidance to lawmakers in more than a dozen state legislatures on the issue. The group brags on its website that “as anti-freedom health policy — such as an individual mandate, an employer mandate, and the ‘public plan’ — surface at the state and national levels, ALEC’s Freedom of Choice in Health Care Act has become an essential tool in securing the rights of patients to make their own health care choices.”

ALEC’s task forces are better known for crafting legislation that coincides, rather than conflicts, with the interests of its private-sector members. Famous for hosting lavish conferences for state legislators who possess no staff of their own, the group pampers lawmakers while providing them the opportunity to collaborate on legislation often previously researched and introduced by the policy shops of its corporate members.

“Their conferences proceed in a very orchestrated manner with legislation that was effectively already designed before [state representatives] get there,” notes Rodger Schlinkeisen, president of Defenders of Wildlife, an environmental group that has differed with ALEC on state legislative priorities in the past. “Representatives are having a good time, playing golf. There’s no heavy lifting on the legislative side so they don’t have to do much. The ALEC staff and industry reps hold their hand and out pops this model legislation with various corporate interests in mind.”

In one case, noted by Mother Jones, ALEC drafted model “truth in sentencing” legislation that restricted parole eligibility, effectively ensuring longer prison terms for inmates. A pivotal member of the task force that crafted the bill’s language? The Corrections Corporation of America, the leader in the private corrections management industry, which stood to benefit directly from longer prison sentences.

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When it comes to the role of the health care industry in crafting the Freedom of Choice in Health Care Act language, however, the outsize presence of the pharmaceuticals industry on the drafting HHS committee is somewhat counterintuitive. The drug companies, represented by the Pharmaceutical Research and Manufacturers of America (PhRMA), are better known of late as the first major private health care interest to enter into an agreement with the Obama Administration over comprehensive health care reform, pledging to promote reform in exchange for only a nominal knock to its bottom line and protection on other issues like drug importation and generics.

The Private Sector Executive Committee for ALEC’s HHS task force is staffed entirely by government affairs and state policy representatives for Bayer, Johnson & Johnson and PhRMA, while the Private Enterprise Board of ALEC, as a whole, is also filled with high-ranking representatives of Bayer, GlaxoSmithKleine, Johnson & Johnson and Pfizer, as well as PhRMA, which represents them all.

“The American Legislative Exchange Council is one of many legislative organizations with whom we have relationships, and in no such relationship is it ever expected that we will always agree about every topic,” says Jeffrey Bond, senior vice president of state government affairs at PhRMA, in a statement in response to an inquiry regarding the pharmaceutical coalition’s relationship with ALEC’s health care nullification language. (Spokespeople at Johnson & Johnson and Pfizer did not respond to requests for comment.)

Others, however, see in the pharmaceutical industry’s material support for Freedom of Choice in Health Care legislation a subtle realignment of priorities within an industry that was never fully on board with the Obama Administration’s reform agenda in the first place.

“Within PhRMA there was division over backing the bill to begin with,” says Paul Blumenthal of the Sunlight Foundation, which tracked the industry group’s deals with the administration during the health care reform debate. “[Then-PhRMA chief] Billy Tauzin and Jeff Kindler at Pfizer were driving the process of backing the bill and the administration, and Tauzin was ultimately driven out of PhRMA as a result. You could be seeing some of that equilibrium shift back.”

Yet apart from a degree of buyer’s remorse, health care consultants note that the drug industry’s schizophrenic actions seem less like a calculated plan than a struggle to reconcile their free-market tendencies with the fact that aspects of reform like the individual mandate stand to improve their bottom line.

“You can look at it as a mass deception by the pharmaceuticals industry,” says Peter Harbage, president of Harbage Consulting, a Sacramento-based health policy consulting firm. “But it’s not so much deception as mass confusion when you think of it from an industry point of view and the nature of something like heath reform.”

“The insurers and PhRMA folks and others — they stand to make a lot of money from coverage, even though ideologically they’re opposed to government regulation,” Harbage adds. “What you’re seeing is a real push and pull in which the industry is trying to reconcile their business interests with their ideological interests. You have the large established interest groups like PhRMA tacitly accepting reform but maybe there’s a company that disagrees and might want to play it both ways. Organizations [like ALEC] create an avenue to take their shots without being public about it.”

And even though the pharmaceuticals industry promotes a lot of legislation through ALEC that benefits its bottom line, there can be a price to doing business with conservative groups, according to one industry insider.

“On this kind of thing in some ways it’s a two-way street,” says the industry insider, who declined to be identified because he represents pharmaceutical clients. “The mandate to buy insurance and the tax penalty is good for the industry. This is one place where you wouldn’t necessarily see the industry advocating. But if you’re lying down with conservative members, your funding goes to support what they’re doing as well as what you want to do.”

Indeed, ALEC’s HHS task force lists 16 pieces of model legislation on its website that tackle issues favorable to the pharmaceutical industry, such as limiting the importation of prescription drugs, reducing drug liability, abolishing price controls on drugs, lowering state taxes on drug samples and promoting coverage for experimental drugs. When considered from the perspective of the industry’s relationship with ALEC as a whole, one potshot with scant legal prospects against the administration’s individual mandate begins to look like a small price to pay.

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But what seems like a legal non-issue is still providing a lot of political fodder for partisans of comprehensive health care reform, on both sides of the aisle.

The courts will ultimately decide the limits of states’ rights when it comes to the question of the Obama Administration’s new health care law, but in the meantime, Republicans are hoping it will energize conservative voters and stave off implementation in Arizona, Oklahoma and Colorado, where similar measures will be on the ballot in November.

“I guess it’s a low investment cost for a group to try to do that,” said Harbage. “You get to automatically have a conversation, and even if it ultimately loses you still had the proposition as a vehicle to motivate voters, and a lot of groups involved might think that’s a good day’s work.”

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