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Bob Graham is executive editor at Insurance & Financial Advisor and IFAwebnews.com.

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The Kaiser Family Foundation today crystallizes in one sentence why the battle for comprehensive, federal health care reform failed. Instead of battling the reasons for rising costs, advocates for large-scale changes continue to vilify insurance companies.

“With a major health overhaul in deep trouble,” say Kaiser Health News staff writers Julie Appleby and Jenny Gold in an article published today, “some lawmakers want a scaled-back approach that targets the indisputably unpopular insurance industry.”

The insurance industry, courtesy of the Democrats, has become the whipping boy for all that is wrong with insurance. But most people’s frustration with insurance is with premiums. A study last week from LIMRA found that most people are happy with their coverage, which, by the same logic that vilifies the insurance companies, means they are happy with their insurance carrier.

The perception is that insurance companies work in autonomously, setting high rates so they can profit. Nothing could be further from the truth. The insurance industry is heavily regulated at the state level, with insurers’ policy provisions, rates and even the forms they use to communicate these things to their policyholders being reviewed closely in all states. Insurers are powerless as state legislatures continue to add coverage mandates, and as Congress, according to Appleby and Gold, may still prohibit them from refusing coverage for pre-existing conditions.

As much as ending the practice on pre-existing conditions would benefit consumers, including me, it will cripple insurers. Health insurance is no different from all other forms of insurance, where insurers try to assess the risk, then collect premiums that will cover that risk with a margin for operating costs and profit. Yes, some CEOs of insurance companies get rich as they run these large companies, but there’s no guarantee. Consider what might have happened to insurance companies if the full-scale H1N1 (swine flu) epidemic caused millions of Americans to need serious medical care. What if H1N1 comes back with a vengeance this fall, sending millions to hospital’s ERs. Insurers would be on the hook to cover it, and they would.

The realities of health insurance are largely unknown and unpopular. But insurance companies are not and should not be “indisputably unpopular.” To portray them that way just further delays any progress on reining in health care costs, something that even insurance companies are all too willing to debate and move forward on.