With Wall Street-Run Companies Headed for $14 Billion Profit This Year,

HCAN Calls for Immediate Rebates Under Affordable Care Act Guidelines

Washington, DC — Profits at the five largest for-profit health insurance companies surged again in the second quarter as their customers continued to cut back on doctor and hospital visits in a slowing economy, according to new financial data released by the industry. Health Care for America Now (HCAN), the nation’s leading grassroots health care advocacy group, said the record-breaking profits show that the insurers continue to foist excessive and unjustified rate hikes on families and small businesses.

“While America’s families and businesses are struggling in a tough economy, insurance companies are racking up unconscionable profits,” said HCAN Executive Director Ethan Rome. “Premiums have gone up 131% since 1999, and people are struggling with every kind of household expense. People need relief. The law says the insurers have to make these refunds, so they might as well do it now when people really need the money.”

Under a consumer protection provision in the Affordable Care Act, the U.S. Department of Health and Human Services estimates that insurers will owe up to 9 million customers as much as $1.4 billion in 2011 rebates payable next year. The new rule (medical-loss ratio) sets a minimum percentage of premiums (80% for individual and small group plans and
85% for large groups) that insurers must spend on actual medical care instead of wasteful overhead, excessive profits and bloated CEO salaries. Companies that fall short of the minimums must rebate the difference to consumers.

According to an analysis by HCAN, Wall Street-run health insurance companies took $7 billion in profits in the first half of 2011 by charging more and spending much less on patient care.

In California, Connecticut and North Carolina, some insurers were so embarrassed by excessive profits piling up in their accounts that they rolled backed rates, declared premium holidays or issued direct refunds. “The entire industry should do the same on a national scale,” Rome said. Despite claims that insurance company premium growth reflects actual changes in medical costs, their increases have consistently been twice the rate of medical inflation.

See below for more information on insurance company profits.

Health Insurers Continue Profit Surge in Second Quarter

Combined profits for UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Cigna Corp. and Humana Inc., which cover one-third of the U.S. population, surged 13.5% to $3.4 billion in the second quarter. If the trend holds, the five companies will take a record $14 billion in profits in 2011. Through the economic recession and its aftermath from 2008 to 2010, combined profits for the five companies increased 51 percent. In 2010, profits grew 17 percent, excluding a one-time $2.2 billion gain from the 2009 sale of a WellPoint subsidiary.

The insurance industry claims to have a low average profit margin of 4.4%, but so far in 2011, Aetna has reported a health care profit margin of 11%, Cigna 7.4%, WellPoint 7.8%, and UnitedHealth 7.7%.

Insurers defend their increasing wealth by saying their profits represent less than one penny of every dollar of national health spending, but that is deceptive. One penny of every health care dollar amounts to $347 billion over the 10 years ending in 2019, according to government projections.

LOWER HEALTH CARE SPENDING

In the second quarter of 2011, growth in premiums rapidly outpaced increases in spending on patient care. Aetna led the industry in finding ways to avoid covering actual health care by shifting medical costs to working families and employers through skimpier coverage and higher deductibles. As a result, the share of premiums Aetna spent in the first quarter on medical care (known in industry parlance as the medical-loss ratio) dropped to 77.9%, a hefty 2.2 percentage-point decline from 80.1% a year earlier. UnitedHealth also trimmed its health care costs, spending 80.7% of premiums on patient care, down from 81.9% the year before. Insurers used to be free to devote any percentage of premium revenue to lavish CEO pay, marketing, administration, lobbying, the care-denial bureaucracy and claims handling services that foul up one in every five claims. The Affordable Care Act will finally rein them in with rebates scheduled for issuance in 2012.

“Americans are struggling to find work, hold onto their homes and provide for their families,” Rome said. “There’s no reason for insurance companies to wait a year to return premium overpayments that they owe and consumers need.”

Medical Loss Ratios Dropped for Most Insurers in Second Quarter

Source: U.S. Securities and Exchange Commission filings

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Health Care for America Now is a national grassroots coalition of more than 1,000 organizations in 46 states representing 30 million people. HCAN led the fight over the past two years to win passage of health reform and to keep Congress from being steamrolled by corporate special interests.

Download the full report in pdf form here.