“We’ve been completely neutral,” said Mary Nell Lehnhard, senior vice president for the Blue Cross Blue Shield Association.

The proposal still faltered last week amid staunch opposition from patient advocates, consumer groups, and others. Democrats successfully blocked a final vote on the bill Thursday. The lead sponsor, Sen. Mike Enzi (R-WY), said he would continue to tweak the bill and press for passage again later this year.

State mandates

No matter how it plays out, Blue Cross/Blue Shield‘s lobbying turnabout illustrates how small legislative tweaks can produce significant political shifts. And it sheds light on how one powerful interest group’s decision to not lobby can be as strategically key as waging a full effort.

For starters, Blue Cross‘s decision to sit this round out helped clear the path for Thursday’s Senate vote; in previous years, the bill never made it out of committee, let alone to a full Senate vote.

“Their (past) opposition to it has kept the bill from ever moving in the Senate,” said Jerry Flanagan, of the Foundation for Taxpayer and Consumer Rights, a California-based consumer advocacy organization.

The Senate bill would have allowed small businesses to pool together through trade associations, such as the Chamber of Commerce or the National Restaurant Association, to offer insurance to their employees. Talent and other proponents said the companies’ increased negotiating power would dramatically reduce the cost of insurance for small businesses and therefore make a big dent in the number of uninsured Americans.

A chance to opt out

But critics said the proposal would also undermine key health care protections by letting insurers opt out of state mandates that guarantee certain coverage. A gamut of patient and medical advocacy groups, from the American Cancer Society to the American Pediatric Association, came out strongly against the bill.

Both Missouri and Illinois, for example, have laws requiring insurers to cover screening tests for prostate and breast cancer. The Enzi bill would have exempted insurers from such mandates.

“The bill preempts state laws that control the cost, quality and accountability of health insurance delivery, causing many important consumer protections to be eliminated,” Lisa Madigan, Illinois’ attorney general, wrote in a letter opposing the bill. Missouri’s Attorney General, Jay Nixon, also opposed it.

In past years, the patient and consumer groups had formed an odd-bedfellows alliance with Blue Cross Blue Shield, which took the lead in killing the bill.

“They played an active leadership role in opposing association health plans,” said Ron Pollack, head of Families USA, a health care advocacy group that in the past teamed up with Blue Cross. “They were often listed as the No. 1 or No. 2 opponent. This year, they’ve shrunk into the woodwork.”

Pollack and other critics say Blue Cross switched from outspoken opponent to quiet spectator because of key changes made by Enzi.

“They were able to get this special deal,” Pollack said.

Blue Cross‘s Lehnhard acknowledged that the company has dropped back from the fight because of provisions Enzi added to the bill. But she denied the insurance giant got special treatment. Instead, she said, they won equal treatment — a switch from an earlier version of the bill that she said would have put Blue Cross at a competitive disadvantage.

In the original version of Enzi’s proposal — taken from a measure championed by Talent when he was in the House — trade associations could offer insurance plans that would be exempt from the state mandates.

Winning some, losing others

Blue Cross and other big insurers worried that would allow new competitors to offer cheaper, bare-bones plans, when they would still be required to offer more expensive packages.

So in revising the bill, Enzi included, among other changes, a provision to exempt all insurers from state mandates, muting a key complaint from Blue Cross.

Craig Orfield, a spokesman for the health committee Enzi chairs, said his boss worked out a careful compromise that took into account a broad array of concerns about the original bill, including those voiced by Blue Cross.

“Chairman Enzi called in representatives from an array of stakeholder groups to talk about what we needed to do in the Senate to get a small business health plan through,” said Orfield.

To critics, however, the changes meant any insurance company could sell a “junk plan… with no real protections,” said Flanagan.

Lehnhard said Blue Cross has always argued for more “flexibility” in determining what insurance package to offer. But she said even if Enzi had required that all insurers adhere to all state mandates, “we still would have been mum. It’s the fact they did the same thing for everyone.”

Staying silent

It would have been better for Enzi if Blue Cross had come out strongly in favor of the bill, critics said.

“You can imagine that Enzi doesn’t want to have the HMOs and big insurance companies out in front on this bill because that will… portray the bill for what it really is, an insurance company giveaway,” Flanagan said.

But Blue Cross officials said they decided not to lobby in favor of the bill because there was still deep concern about what might happen if the Senate took Enzi’s bill into negotiations with the original House version that would impose tougher rules on big insurers.

In any case, by broadening the exemption, Enzi may have won Blue Cross‘s silence, but he further infuriated other interests, such as the American Nurses Association, the American Chiropractic Association and diabetes, cancer, and other groups.

On Thursday, those forces prevailed when Democrats stopped a GOP move to cut off debate and move to a final vote.

Orfield, the health committee spokesman, said Enzi isn’t done. “He’s going to step back and negotiate with some more Democrats and see what can be done,” he said.