By Terry M. Neal
Washington Post Staff Writer
Saturday, June 27 1998; Page A01

When it wanted to nix Congress's landmark anti-tobacco bill, the tobacco industry opened its checkbook and financed $40 million worth of advertising that warned against the intrusive reach of big government.

Now the industry that provides health insurance to 160 million Americans is planning its own ad blitz that will similarly appeal to voters' disdain of federal intrusion. The effort comes at a time when Democrats and Republicans are lining up behind proposals in Congress that would force broad changes on health maintenance organizations (HMOs) and other managed-care companies.

Among the reforms being considered are requirements that HMOs allow patients to see the physicians of their choice, that patients be allowed to sue HMOs for their care decisions and allowing patients to appeal denial of care and other HMO decisions to an independent third party.

This week, on the same day that a GOP task force led by Rep. J. Dennis Hastert (Ill.) proposed managed-care reform, the American Association of Health Plans (AAHP) began running television ads in the Washington, D.C., region that accuse politicians of exploiting the issue for political reasons and warn that increased regulation will raise costs and ultimately make health care unaffordable to many families.

Within weeks, the ads will begin airing in selected TV markets that include the districts of the GOP House leadership and key chairmen, said Mark Merrit, chief of strategic planning and public affairs for AAHP.

"Hear about the politicians' new game . . . bashing HMOs and other health plans to trick you into voting for them," the ad's narrator says as the camera focuses on a pin~ata being whacked with a stick, spilling a load of campaign buttons. "The politicians' new laws and regulations could cause nearly two million hard-working Americans to lose their health coverage."

Merrit said AAHP has spent close to $2 million this year on other ads and public relations strategies around the country, but would not say how much it paid for the air time here. "We know that what's going on is a feeding frenzy and that there are a lot of piranhas in the pool," he said. "But there are real economic and gratuitous costs associated with managed care-bashing legislation."

It's impossible to say exactly how much the industry as a whole has spent in recent months on similar ads. Unlike the $40 million ad campaign bankrolled by four tobacco companies, thousands of large and small businesses around the country are contributing to the campaign against the HMO legislation.

Many companies are contributing through AAHP and the Health Benefits Coalition (HBC), which has put about $2 million into advertising. Both groups have hired some of the most influential lobbying and public organizations here.

Insurance industry officials know their image has suffered, so they have formed important alliances with the powerful business lobby, which shares concerns about cost and liability. One group lobbying against the proposals, the Healthcare Leadership Council, includes about four dozen chief executive officers and top officials from insurance companies, such as Cigna HealthCare, and big businesses, such as Eli Lilly & Co.

"Unlike the tobacco companies, we have allies," said one insurance industry lobbyist who asked to remain anonymous.

What is noteworthy about the amount of money spent so far is that it comes even before the first committee vote has been taken in Congress. Legislation has been stalled as Republicans debated internally how to proceed with a politically popular proposal without violating key party tenets against big government. Most of the tobacco ad blitz came after a Senate committee voted 19 to 1 for an anti-tobacco bill, which was killed on the Senate floor last week.

There are groups lobbying for managed-care reform, but they do not appear to be as organized and cannot match the overall firepower of the forces opposed to it. One group, the PARCA Alliance, which supports the Patient Access to Responsible Care Act bill sponsored by Rep. Charles Whitlow Norwood Jr. (R-Ga.), has bought about $100,000 worth of radio ads around the country, said Richard Green, a spokesman. Two other groups, Center for Patient Advocacy and Families USA, have been active in lobbying for managed-care reform, but don't have the budgets to buy air time.

"We've really gone out through the grass roots, our membership, telling stories, letting their legislators know, going through the media," said center executive director Terre Hall. "It doesn't take millions and millions of dollars to do that."

The opposition forces have a tough battle ahead. Recent polls have suggested that the public's desire for managed-care reform is a top issue, exceeding in one survey tobacco industry and campaign finance reform. Furthermore, managed-care reform appears to cut across partisan ideology.

But with more than 1,000 members, including some of the country's largest insurance companies -- such as Humana, Blue Cross and Kaiser-Permanente -- AAHP has the kind of deep pockets it takes to run a costly and prolonged public relations campaign.

The Health Benefits Coalition, for example, is made up more than 30 organizations, including the U.S. Chamber of Commerce, the National Federation of Independent Businesses and the Business Roundtable. Another of HBC's members, the Health Insurance Association of America, financed the $15 million "Harry and Louise" ads that helped sink President Clinton's health care proposal in 1994.

One HBC ad that aired on conservative talk show host Rush Limbaugh's show during the April congressional recess likens Norwood's reform bill to a Frankenstein's monster-like experiment gone awry: "Remarkable, you've stitched together hundreds of new government mandates, putting Washington in control of everyone's health care," an aide says to Congressman Frankenstein.

Those and other HBC ads largely have been targeted at conservative Republicans who have signed on to Norwood's bill or the so-called Patient's Bill of Rights supported by Clinton and most Democrats. One ad that ran in the district of Rep. Lindsey Graham (R-S.C.) accuses him of joining "liberal Democrats like Ted Kennedy" and signing on to the "most costly big government health care bill since the Clinton health care plan."

Graham, a member of the GOP's firebrand conservative class of 1994, said the ad actually endeared him to constituents. He said the anger of his constituents against HMOs is palpable and bipartisan. "This is the big issue for [Republicans] in November," he said. "It can be a good one for us or it can clean our clocks."

Other groups, such as the Coalition for Patient Choice, have achieved results without spending as much money. The coalition, which includes clients of the conservative public relations group Creative Response Concepts, has helped lobby against various reform proposals. Those clients include Oliver L. North and Phyllis Schlafly.

CRC specializes in "earned" media, influencing policy through favorable news stories and editorials. Another CRC client, the Small Business Survival Committee, set aside about $250,000 for radio ads and has spent about $75,000 on ads targeting conservative Republicans who had signed onto various reform proposals. Although none admitted to having been influenced by the negative ads and editorials, about a half-dozen lawmakers removed their names from bills they were co-sponsoring.

"You don't have to spend a lot of money to make a big splash," said Karen Kerrigan, president of the Small Business Survival Committee, which has 50,000 members.