The industry group representing health insurers is undergoing a massive restructuring seven months after passage of healthcare reform.

Over the past week, America’s Health Insurance Plans (AHIP) has laid off about 10 percent of its staff of about 160, the first such restructuring in years.

AHIP also announced Tuesday that two new senior staffers were joining the group, the first of several expected hires.

In many ways, AHIP is at a crossroads. The group, which was closely aligned with Republicans when they controlled Congress between 1995 and 2006, must work with a Democratic administration to implement the law. Meanwhile, it will be under pressure from congressional Republicans who want to repeal it.

The GOP is favored to win control of the House and has an outside shot of grabbing the majority in the Senate.

While there is much uncertainty in what AHIP’s role in the health reform debate will be over the next several years, it is clear that the group is making major personnel changes.

“Our association has a large and diverse membership that has grown since the passage of the new law,” AHIP spokesman Robert Zirkelbach told The Hill. “We are restructuring to meet the new advocacy and policy challenges facing our growing membership. We are focused on working to minimize the potential disruptions and cost increases associated with the new law, and also on advancing our legislative priorities.”

AHIP is focusing on the major changes the new law will bring about over the next four or so years – such as the creation of state-based health insurance exchanges and the identification of essential benefits that plans must cover – while also pursuing key legislative changes in Congress. The association will lobby members of Congress to halt the new premium tax scheduled to go into effect in 2014, allow more flexibility in age rating and scale back the tens of millions of dollars in Medicare Advantage cuts.

Coming changes, The Hill has learned, include the hiring of more staff on the advocacy side and the combination of federal and state lobbying under one umbrella to better deal with a law that leaves many decisions to the states.

The restructuring come as healthcare stakeholders have raised questions about AHIP’s effectiveness during the health reform debate.

Some feel the organization caved to Democrats and in return got a law that basically turns health plans into public utilities forced to meet an unwieldy number of costly coverage mandates.

Meanwhile, Democrats increasingly disparaged the industry as the overhaul debate grew more contentious and lawmakers began to refer to the effort as “health insurance reform.”

House Speaker Nancy Pelosi (D-Calif.) in July of last year called insurance companies “villains” and “immoral” for trying to scuttle the public option.

President Obama summoned the CEOs of several major insurers to the White House in early March to complain about their rate increases, then publicly castigated them soon after for their failure to “give me a straight answer as to why they keep arbitrarily and massively raising premiums.”

The president’s comments sparked an angry retort from Cigna CEO David Cordani, who told Forbes magazine in April that “if you look at the outcome, and our industry being vilified, that’s a bad outcome.”

At the time, he graded the health insurance industry’s lobbying with an F. But Cigna has since said it’s “very supportive” of AHIP and its head, Karen Ignagni.

Others point out that the group’s top two priorities – killing the competition from a public plan and retaining an individual mandate that all Americans buy insurance – were attained.

Still, that did little to satisfy the critics.

Soon after the grumbling became public, AHIP’s board of governors proactively passed a four-paragraph resolution of support “for AHIP and the leadership of Karen Ignagni as President and CEO.” The resolution was adopted unanimously on Aug. 11.

Ignagni has been leading AHIP since its creation, in 2003, by the fusion of the American Association of Health Plans (AAHP) and the Health Insurance Association of America. Before that she’d headed AAHP for a decade.

Dissatisfaction came to a head about three months ago, several industry sources said, when five of AHIP’s biggest members began to talk about starting a $20 million war chest to help elect Republicans willing to work with the industry to overturn what they view as the new law’s more onerous regulations. There’s no evidence that the five insurers – Aetna, Cigna, Humana, UnitedHealth and WellPoint – ever went ahead with the initiative though, and in any case insurers, and AHIP, have been giving more to Republicans over the past few months.

During the 2008 electoral cycle, AHIP only slightly favored Republican candidates, 52 percent to 48 percent, according to Federal Election Commission records. This cycle the GOP is more heavily favored, 62 percent ($278,000) to 38 percent ($169,500) through the end of September.

In total, the health insurance industry gave Democrats $2.25 million and Republicans $1.7 million between January and August 2009, according to the Associated Press. Since September of 2009, the breakdown has flipped with Democrats getting $2.4 million and Republicans $3.3 million.

The big insurers are also said to be upset that AHIP did not fight for their priorities as state insurance commissioners were writing regulations defining the medical loss ratio, which requires that insurers spend 80 percent or more of premiums on care.

The big insurers wanted to be able to calculate the ratio based on an average of the policies they sell nationwide — called aggregation — but AHIP didn’t take a position because its smaller members didn’t agree.

The regulations the National Association of Insurance Commissioners ended up adopting earlier this month did not include aggregation and also left out several of AHIP’s priorities, such as being able to count fraud prevention as care.

“The current proposal could have the unintended consequence of turning-back-the-clock on efforts to improve patient safety, enhance the quality of care, and fight fraud,” Ignagni said in a statement.

One industry source who requested anonymity said part of the problem is that AHIP was slow to hire lobbyists with close ties to the executive branch, which is implementing the law.

“They need people who are really connected to [the Department of Health and Human Services (HHS)] and the White House,” the source said. “I’m not sure I would have waited until now to hire a bunch of people to deal with the administration.”

AHIP officials scoff at that criticism.

In addition to Mary Beth Donahue, the former chief of staff to HHS Secretary Donna Shalala under President Bill Clinton, AHIP has several high-ranking officials who are in close contact with the White House and HHS.

These include Ignagni, a former head of the AFL-CIO’s Department of Employee Benefits. Ignagni seems to slightly favor Democrats in her own contributions, according to an analysis of FEC records: Through the end of June, she’d given a total of $22,370 in the 2009-2010 cycle, with $12,370 going to Democrats and $10,000 to Republicans. All of it went to incumbents, except $1,000 for Ohio Republican Rob Portman, who is running to replace retiring centrist Sen. George Voinovich (R).

As early as April 8, Ignagni spelled out in a memo to her members how the association was shifting gears to focus on implementation. This included the creation of a healthcare reform implementation task force and the launch of webinars to train staffers about the effects of the new law.

The recent hires are part of that strategy. They include: new general counsel Joe Miller, who comes from the antitrust division of the Department of Justice; and Daniel Durham, who will become the executive vice president for policy and regulatory affairs starting Nov. 15 after leaving the Pharmaceutical Research and Manufacturers of America.

Both have served under Democratic as well as Republican administrations. Miller was with the antitrust division from 1998 through 2010. Durham left AARP to join President Clinton’s Social Security Administration in 1998 as acting deputy commissioner for retirement policy, and served under President George W. Bush as deputy assistant secretary for health policy at HHS between 2001 and 2004.

AHIP says it won’t cut back on its legislative branch lobbying as it beefs up its focus on the administration. Two of the three Capitol Hill lobbyists – one Democrat and one Republican – who left in August and September are expected to be replaced. The third – Behrends Foster, a former chief of staff to Ways and Means ranking member Dave Camp (R-Mich.) – will keep AHIP as a major client for his new lobbying shop, Bluestone Strategies LLC.