Health Care for America Now has a new report out today on the insurance industry's profits and customer base [pdf] and the statistics are shocking:
The five largest U.S. health insurance companies sailed through the worst economic downturn since the Great Depression to set new industry profit records in 2009, a feat accomplished by leaving behind 2.7 million americans who had been inprivate health plans. For customers who kept their benefits, the insurers raised rates and cost-sharing,and cut the share of premiums spent on medical care. Executives and shareholders of the five biggest for-profit health insurers, UnitedHealthGroup inc., WellPoint inc., Aetna Inc., Humana Inc., and Cigna Corp., enjoyed combined profit of $12.2 billion in 2009, up 56 percent from the previous year. It was the best year ever for Big Insurance.
The 2009 financial reports from the nation’s five largest insurance companies reveal that:
- The firms made $12.2 billion, an increase of $4.4 billion, or 56 percent, from 2008.
- Four out of the five companies saw earnings increases, with CIGNA’s profits jumping 346 percent.
- The companies provided private insurance coverage to 2.7 million fewer people than the year before.
- Four out of the five companies insured fewer people through private coverage. UnitedHealth alone insured 1.7 million fewer people through employer-based or individual coverage.
- All but one of the five companies increased the number of people they covered through public insurance programs (Medicaid, CHIP and Medicare). UnitedHealth added 680,000 people in public plans.
- The proportion of premium dollars spent on health care expenses went down for three of the five firms, with higher proportions going to administrative expenses and profits.
The numbers may be shocking, but they shouldn't be surprising. This is how the industry makes money, by charging people more and cutting the unprofitable people from their rolls. In fact, the one company who's profit margin went down slightly this year - Aetna - was also the only company to add more customers to its rolls in 2009.
But the industry will go to any length to "justify" their profits and their policies of dropping their sick or expensive customers.
First, they'll claim that the cost of medical care is going up, and so they need to raise prices, but it's simply not true. As Congresswoman Rose DeLaura (D-CT) pointed out on a call with reporters announcing this report:
They'll say the increases are justified because medical care is going up, and they'll hide behind their actuaries to explain their rate increases. But this is coming from the same people who've been saying health insurance reform will increase costs. They can't have it both ways.
She's absolutely right. Insurance costs are skyrocketing now. Double-digit rate increases like those announced from Anthem in California have been common for years, and will continue to be "commonplace" if we don't reform our health care system, according to Richard Kirsch, Health Care for America Now's National Campaign Director. And yet, while raising their rates, insurers claim health reform will increase prices. It seems there's only one way prices can go in according to the insurance industry - up.
Next, insurers will also claim that these profits aren't out of the ordinary. As Andrew Kurz, former chief financial officer of Wisconsin Blue Cross-Blue Shield, explained, they are:
Insurers claim profit margins are only a slim 3-5%. But with competition, you have to carefully price products. Insurers don't have to do that, they just raise rates on their most expensive customers. Even if insurers earn less money one year, they can raise prices the next to make up for it. And they can raise profits in concert with other insurance companies because they have anti-trust exemptions.
Insurance company profit margins put the industry in the top 10% of all industries, up there with cigarette manufacturers. Insurers price their products like a discretionary luxury, not something essential for health and well-being.
Finally, insurers will - perversely - try and blame the economy for their record-breaking fortunes, saying employers have been shedding jobs and therefor dropping insurance coverage, leading to a decrease in customers. And they're certainly right in the sense that less jobs equals less employer-based health coverage, but that obscures the fact that employers have been steadily dropping health coverage for more employees for 15 years - even during good times - because the insurance industry's prices keep skyrocketing much faster than inflation.
None of the excuses can explain away the basic reality that insurers make more money when they insure less people. They can pay their CEOs more ("administrative costs" rose this year) when they can charge the healthy exorbitant prices and drop or deny these loyal customers when they become sick and therefore expensive. Until we change that basic incentive structure, these Wall Street-run corporations will continue to operate in exactly the same way.
This is what health care reform is, in part, designed to change. Regulations on how much insurers must spend on medical care as opposed to profits and CEO pay will give consumers fair value for their premium dollars. Rules regarding rate increases will eliminate price gouging. Competition within the exchange (with a public option in the mix) and elimination of the insurance industry's anti-trust exemption will force these companies to price their products within reach of their customers.
As Congressman DeLauro said this morning, "Despite [the insurance industry's] best efforts, we passed a bill in the House and Senate, and we need to press forward to have health insurance reform to provide economic security to American families."