How insurance companies fight recession: Jack up your premiums

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When President Obama talked last night about the absolute need for a
publicly run health care option for Americans, a competitor to private
insurers, he obviously had the startling new profits of the nation’s biggest health insurance company in mind. As Obama put it:

[Having] a public plan out there that also shows that maybe if you take
some of the profit motive out, maybe if you are reducing some of the
administrative costs … that’s
going to incentivize the private sector to do even better. … At a time when
everybody is getting hammered, [insurers are] making record profits, and
premiums are going up. How can you
ensure that those costs aren’t being passed on to employers or passed
on to employees, the American people, ordinary middle-class families,
in a way that over time is going to make them broke? Well, part of the
way is to make sure that there’s some competition out there.

Insurance companies and their sock puppets in Congress see an efficient government competitor as a deadly threat. Why? Because their idea of
coping with losses is to just raise prices for the customers they
have left. That’s the lesson of the surprising 2nd quarter profit
increase reported by the nation’s biggest health insurer, United
Healthcare. Its revenue was up, and its profit spiked by 155% to $859
million, compared with only $337
million in the year-ago period. Yet its enrollment was down 2% overall,
mostly from the loss business from recession-hammered employers. And its
investment income was down by a whopping 38%.

The company argues that its profits look inflated, because last
year’s figure included a big one-time loss. But it can’t dispute that
even its gross revenues were up 7%, at $21.66 billion, from $20.27
billion last year. That increase was reaped by raising premiums on its
declining number of customers, and almost surely by forcing out its
least profitable customers and employer plans, a form of industrywide
dumping described in Congressional testimony this month by former Cigna executive Wendell Potter:

To help meet Wall Street’s relentless profit
expectations, insurers routinely dump policyholders who are less
profitable or who get sick. … They also dump small businesses whose
employees’ medical claims exceed what insurance underwriters expected.
All it takes is one illness or accident among employees at a small
business to prompt an insurance company to hike the next year’s
premiums so high that the employer has to cut benefits, shop for
another carrier, or stop offering coverage altogether.

(See also Potter’s interview with Bill Moyers on PBS).

Why should an insurance company struggle to be more efficient, or
accept lower profits in a deep recession, if it doesn’t have to?  Why
should an insurance company care if you have health care at all–or whether you can
cope with increasing copays and deductibles–as long as its profits and
CEO pay stay fat?

There are two powerful groups in Washington intent on killing
Obama’s public health care option: insurance companies and political
opponents who want to, in the words of South Carolina Sen. Jim DeMint,
"break [Obama]" before his first year as president is done. The
insurers have the money, and the opposing politicians have a media
platform. It’s to Obama’s credit that he’s sticking with his demand for
a competitor to Blue Cross, United Healthcare and friends. Anything
else makes us all roadkill on the insurers’ drive for more profit.


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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