Greater Peoria is a medical Mecca, and it also has a significant presence of insurance companies, so one wonders whether there’ll come a time when central Illinois will be Ground Zero for a battle between health providers and health insurers.
Patients already seem like financial collateral damage in an archaic health-care system that puts profits ahead of people.
The time for a showdown could be approaching, as profits at big for-profit health insurers skyrocketed in the second quarter, according to the U.S. Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC), and even non-profits are reporting sizable gains since 2010.
“Customers continued to cut back on doctor and hospital visits in a slowing economy, [but] record-breaking profits show that the health insurers continue to foist excessive and unjustified rate hikes on families and small businesses,” according to Melinda Gibson of Health Care for America Now (HCAN), a grassroots health care advocacy organization.
According to financial data released by the industry and analyzed by HCAN, Wall Street-run health insurance companies took $7 billion in profits in the first half of 2011 by charging more and spending less – on patient care.
“While America’s families and businesses are struggling in a tough economy, insurance companies are racking up unconscionable profits,” said Ethan Rome, HCAN’s executive director. “Premiums have gone up 131 percent since 1999, and people are struggling with every kind of household expense.”
The five largest for-profit health companies, their second quarter profits (and the percentage change from the second quarter last year) are: Aetna, $536 million (+9.3 percent), Cigna, $408 million (+38.3 percent), Humana, $460 million (+35.3 percent), UnitedHealth Group, $1.2 billion (+12.8 percent), and WellPoint, $701 million (-2.9 percent),
Combined profits for the five, which together cover one-third of the U.S. population, surged 13.5 percent to $3.4 billion in the second quarter. If that trend holds, the five companies will take a record $14 billion in profits this year. The insurance industry claims to have a low average profit margin of 4.4 percent, but so far in 2011, Aetna has reported a health-care profit margin of 11 percent, Cigna 7.4 percent, WellPoint 7.8 percent, and UnitedHealth 7.7 percent.
In Illinois, Blue Cross/Blue Shield (Health Care Service Corp.) has more than 12 million members in the state, plus many others in New Mexico, Oklahoma and Texas, making it the country’s largest “customer-owned” health insurer, a technical nonprofit with no shareholders.
With affiliates, Blue Cross/Blue Shield is the nation’s fourth largest health insurer overall, and its second quarter this year also showed dramatic improvement from 2010. BC/BS’s net income changed from a loss of $7.9 million to a loss of $825,000 – a $7 million turnaround. Its net capital improved from a loss of $5.3 million to a gain of $9.6 million – a $14.9 million swing. Further, BC/BS’s “net cash from operations” was up from a loss of $10.3 million a year ago to a gain $10 million this year, a $20 million increase.
Despite claims that insurance company premium growth reflects actual changes in medical costs, their increases have consistently been twice the rate of medical inflation.
“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,” said Gibson of the HCAN group. “One penny of every health care dollar amounts to $347 billion over the 10 years ending in 2019, according to government projections.”
Also, under a consumer protection provision in the Affordable Care Act, the U.S. Department of Health and Human Services estimates that insurers could 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 that insurers must spend on actual medical care instead of wasteful overhead, excessive profits and bloated CEO salaries. The minimum is 80 percent for individual and small group plans and 85 percent for large groups. Companies that fall short of the minimums must rebate the difference to consumers starting next year.
In a few states, including North Carolina and California, some insurers were so concerned about excessive profits that they reduced rates, declared “premium holidays” or issued refunds to policyholders.
“The entire industry should do the same on a national scale,” Rome said.
Besides charging hard-to-justify high premiums, health insurers are spending less 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,” Gibson said. “As a result, the share of premiums Aetna spent in the first quarter on medical care (known as its ‘Medical-Loss Ratio’ [MLR]) [was] down 2.2 percentage points from a year earlier.”
Here are Medical-Loss Ratios reported for the first quarter this year for those same five for-profit health insurance corporations: Aetna, 77.9 percent, Cigna, 78.0 percent, Humana, 82.2 percent, UnitedHealth Group, 80.7 percent, and WellPoint, 85.7 percent.
Previously, Blue Cross/Blue Shield’s Medical Loss Ratio financially improved from an 86.1 percent in 2009 to 83.1 percent in 2010, according to Standard & Poor’s. However, Citi research in April reported BC/BS’s MLR in Illinois to be even lower – 72.1 percent; in Oklahoma it’s 73.5 percent and in Texas 64.4 percent.
“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.”
Perhaps health insurers are piling up extra cash before the mandated refunds take effect.
Or maybe they’re hedging and hoping conservatives will convince Americans to vote against their own interests and elect people to repeal health care reform.
Will Peoria progressives or health-care providers stand up to the profitable, powerful insurance lobby?