Wrong Direction: 2009 Insurance Company Profits Up With Fewer Covered
by Noam Level
Association Press
Washington » As the nation struggled last year with rising health care costs and a recession, the five largest health insurance companies racked up combined profits of $12.2 billion — up 56 percent over 2008, according to a new report by liberal health care activists.
Based on company financial reports for 2009 filed with the Securities and Exchange Commission, the report said insurers WellPoint Inc., UnitedHealth Group, Cigna Corp., Aetna and Humana Inc. covered 2.7 million fewer people than they did the year before.
It is not good news to see that the top five health insurance companies in the nation had higher profits in 2009 with fewer customers and more premium revenue being spent on salaries and administration.
Insurance companies are doing little to drive down the cost of medicine. They are declining coverage and increasing premiums and the cost of medicine continues to escalate.
Companies are abandoning coverage of their employees and this will increase the bad debts incurred by hospitals for giving required emergency care. Hospital emergency rooms will not be able to handle the increased number of uninsured people who have no alternative but to suffer until emergency care is their only option.
Insurance companies are leaving the high risk risk customers for the government, hospitals, and doctors to take care of. If we don’t get a nationalized health insurance program we will have people dying on the streets like other Third World countries—-which we will become without facing the health care issues.
Republicans who just say ‘no’ are the ‘death panels’ they fear from the government.
The report Thursday also said three of the five insurers cut the proportion of premiums they spent on their customers’ medical care, committing relatively more to salaries, administrative expenses and profits.
Prepared by Heath Care for America Now, a coalition of liberal advocacy groups and labor unions, the report was aimed at bolstering the drive by Democrats to complete work on a health care overhaul, which insurers have vigorously opposed.
Industry representatives Thursday criticized the report’s approach, pointing out that 2008 was a bad year financially across many industries, skewing the 2009 comparison.
“It is disingenuous to look at the profits at one company today compared to where it was in the depth of a recession,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.
WellPoint’s 2009 profit margin was 7.3 percent, the highest of the five big insurers. Margins at the other four ranged from 3.4 percent for Louisville, Ky.-based Humana to 7.1 percent for Philadelphia-based Cigna.
Other sectors of the health care industry, including pharmaceutical companies and device makers, typically are more profitable.
But the industry’s improving financial fortunes is drawing more criticism because all but one of the companies achieved the better results at the same time they lost customers.
WellPoint shed nearly 1.4 million customers, a 3.9 percent drop over 2008, according to its filings. And Cigna lost 5.5 percent of its customers, or 639,000 people. Only Aetna, which also was the only company whose profits decreased from 2008, gained new customers, picking up an additional 1.2 million people, an increase of 6.9 percent.
The shrinking customer base — which reflects increasing unemployment and the growing number of companies that are dropping coverage — was offset slightly by growth in the companies’ public sector business.
Industry analyst Sheryl Skolnick, a senior vice president at CRT Capital Group, said many of the insurance companies are driven to increase prices for their products to satisfy investors, which in turn drives away more and more customers.
“It is a terrible thing to run your business for Wall Street,” Skolnick said. “It creates very bad incentives, and it ultimately prevents you from doing the thing that is in the best long-term interest of your business. … There is no way that as long as these businesses are publicly traded, they can have the best interest of their customers at heart.”
39% rate hike after $2.7B profit
Health insurer WellPoint is blaming the Great Recession and rising medical costs for its planned 39 percent rate increase for some California customers of its Anthem Blue Cross plan. But Health and Human Services Secretary Kathleen Sebelius isn’t buying the explanation in a letter delivered to her Thursday. Sebelius said “it remains difficult to understand” how premium increases of that size can be justified when WellPoint Inc. reported a $2.7 billion profit in the last quarter of 2009. She also noted that the premium increases are 10 times higher than the increase in national health care costs. President Barack Obama has seized on the premium hikes in California as an ill omen of what will happen around the country if lawmakers fail to enact health care overhaul legislation. “If we don’t act, this is just a preview of coming attractions,” he said at a news conference Tuesday. Source » The Associated Press
March 1st, 2010 at 10:31 pm
Last year they didn’t give any raises at work because of the poor economy, but health insurance premiums went up 10%. This year, they decided to give raises of less than 2% because employee morale is at an all time low. I guess less than 2%is better than nothing, right? But health insurance is going up another 10%. It’s crazy! I heard a story on NPR last week that said that insurance companies initially deny 1 out of every 14 claims. A lot of them that are denied people appeal and do end up getting the claim paid, but there are a huge amount of people that just get the bill and think they are responsible for it and go ahead and pay it. The whole system is broken.