Health Insurance Industry Fudges Data To Downplay Its Astronomical Profits
Health Insurance Industry Fudges Data To Downplay Its Astronomical Profits
America’s Health Insurance Plans (AHIP) — the lobbying arm of the insurance industry — maintains that “for every dollar spent on health care in America, approximately 1 penny goes to health plans’ profits.” The group’s health care reform website offers the helpful visual of a subdivided dollar bill: “Fact Check: Setting the Record Straight on Health Plans’ Profits,” one blog post exclaims. Only one one-hundredth of the premium dollar is pocketed by the insurer, the rest is spent on providing medical care.
But as NPR’s All Things Considered points out the group’s “fact check” is itself misleading, since insurers are measuring their profits against total health care spending, not company revenues. “All that statement says is, if you eliminated all our [insurance company] profits, national health spending in America would be 1 percent lower. It has meaning only in that context,” health care economist Uwe Reinhardt explains. Within the context of companies’ revenues, insurers skim off 15-20 percent of premium dollars for administrative costs and profits. In fact, an examination of insurers’ medical loss ratio — the fraction of revenue from a plan’s premiums that goes to pay for medical services– suggests that within the last 10 years, insurers have been spending less on medical care and more on administrative costs or profits:
Moreover, a report by Families USA found that “insurers in the individual market sometimes maintain medical loss ratios of only 60%, retaining 40% of premium dollars for administration, marketing and profit.” “For the 10 biggest insurers in the year 2006 (the year the insurers used for the 1 cent out of every dollar depiction above), profits were anywhere from 2 to 10 percent, or two to 10 pennies on the dollar. That’s two to 10 times as much as what the insurance industry group suggests in its illustrations.”
The top five earning insurance companies averaged profits of $1.56 billion in 2008 and reported spending an average of “more than 18 percent of their revenues on marketing, administration, and profits.” That year, CEO compensation for these companies ranged from $3 million to $24 million.” Below is a partial list of insurer/CEO profits:
| Insurer: | Company Profits: | CEO Total Compensation: | CEO 5 Year Compensation: |
| UnitedHealth Group | $2,977,000,000 | $5,030,000 | – |
| WellPoint | $2,490,700,000 | $4,070,000 | – |
| Atena | $1,384,100,000 | $38,860,000 | $77,860,000 |
| Humana | $647,000,000 | $2,390,000 | $56,910,000 |
| Cigna | $292,000,000 | $30,016,000 | $120,510,000 |
CEO compensation seems to be decreasing, if ever so slightly. A survey by Modern Healthcare “of compensation for the health care CEOs” failed — for the first time in seven years — to turn up a healthcare CEO who raked in more than $15 million in compensation last year.” The performance of the stock market in 2008 was a big reason that the compensation of the 30 CEOs covered by the survey was relatively low, Kaiser Health News noted. But the “relative down year” for these executives “probably won’t generate much empathy” for them because “the median compensation… was still a bit more than $4 million. Moreover, as the detailed disclosures on executive pay required by the U.S. Securities and Exchange Commission show, every CEO has stock options that could be worth millions as the equity markets recover.”
Despite lower than expected profits, insurers are not holding back. The industry already set records from January to March, “when health-care firms and their lobbyists spent money at the rate of $1.4 million a day” on campaigns designed to influence the health care reform legislation now moving through Congress.
6 Responses to “Health Insurance Industry Fudges Data To Downplay Its Astronomical Profits”
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The government has promised a health care reform that guarantees quality, affordable care for everyone in the United States — and offers the choice of a public health insurance plan. Now another bill was passed, the HR 3200. HR 3200 is a health care bill, and what it does is that it will provide affordable health care for all, and curtail medical costs. It also makes it mandatory for all Americans to have health insurance, but creates a government run (taxpayer funded) alternative to private insurance, prohibits exclusion on basis of pre-existing condition, and then (here’s the kicker) places a surtax on all households that earn more than $350,000 to pay for it. (To be fair, they don’t need sympathy.) The bill HR 3200 is likely to be wildly unpopular, even if it might mean fewer people needing emergency cash loans to see a doctor.
August 6th, 2009 at 6:16 amOn the board of WellPoint sits Susan Bayh, wife of Senator Evan Bayh, and William H.T. Bush, also known as Uncle Bucky to George W.
United Health has Gail Wilensky. It paid her over $250,000 for board work last year. Ms. Wilensky owns over $9 million in United Health’s stock.
There’s a big for-profit healthcare club behind deform. It’s coming.
August 6th, 2009 at 10:52 amBismarck was correct in 1883. Guaranteed health care is necessary and health insurance industry for profit is immoral. It is in their personal interest to deny coverage to those who need it. The medical insurance companies and HMO’s are parasites on people who need care. Their profits and obscene CEO salaries are are shortening lifespans and killing people. They provide zero value for peoples health. Buying votes in congress with 1.4 million dollars ea ch day is bribery.
August 6th, 2009 at 6:07 pmHealth Care has so many issues… and I’m far from a pro, but why is it that the insurance companies always come out as the “evil” entity? Didn’t the doctors, nurses, hospitals, and drug companies (not to mention the companies that create everything that fills a hospital – like the fancy beds and x-ray machines) all make a profit?
“For Profit” is a good thing. Sure, it can go too far – but that is why there should be competition. What I see as the “real problem” is that too many health insurance policies are through businesses as part of a compensation package. The duty to check rates and move insurance companies is a big ordeal and a lot of work for someone that probably already has a lot of other work they also need to do. This means that their job is easier if they stay with their current insurance company. Rates don’t get shopped like they would if individually you or I were buying the policies ourselves. Think of your Auto Insurance policy. If your buddy told you that they were paying hundreds of dollars less for their policy, you’d probably do a little checking (shopping) around to see if you could get a better deal… but if your health insurance is through your company, that’s not possible.
August 9th, 2009 at 10:01 pmThat’s just the start. Doctors and drug companies can also charge huge rates because insurance companies have to pay the majority of the bills. If you had to pay for everything yourself, you’d be much more conscious of the doctor bills and would check around with doctors to find a good combination of a quality doctor and a reasonable price. Instead, it normally doesn’t matter what doctor you go to… just if they are part of the HMO or not.
As the economy goes down hill, people get laid off… not only do they lose their jobs, but their insurance too. But don’t worry – there’s COBRA…. a policy that is so expensive it is worthless anyways. If you had your own personal plan, you wouldn’t lose it when you change jobs (and it would be an affordable plan that you chose). You’d keep it just like you keep your Auto Insurance.
As I said at the beginning… there are lots of issues with Health Care, and there needs to be regulations. However, profit is a good thing. After paying lots and lots of money to an Insurance company, the last thing you want is for them to go bankrupt when you need them. The lowest hanging fruit that would affect the entire industry from the insurance companies to the connecting chain to drug companies would be for individuals to receive higher salaries and allow them to shop for their own insurance plan. Let us choose the expensive or cheap plan. Let us choose which company we want to buy from. Group plans claim to offer a less expensive policy for the “whole” –but it is a major contributor for many of our problems.
I think I will try to recommend this post to my friends and family, cuz it’s really helpful.
August 11th, 2009 at 10:14 amThis is to Ryan. I work at a the University of Iowa Hospitals and Clinics. I work in the Pediatric Speciality dept. When you say doctors and drug company can charge huge rates because they know the insurance companies will pay a majority of the bill is actually wrong. The insurance companies set the rates. Negotations take place every year over contracts with health insurance companies and what they choose to want to pay. In turn the hospitals have to make money some how, they have to pay employees, utilites, etc and in order to cover those cost they have to raise their rates. Not only this but people don’t get any say in their healthcare anymore…the insurance company does. They decide if something is “medical nessessary”. Even if the doctor says it is medically nessessary they have to fight with insurance companies for payment.
All the while, their are people who unfortuantely don’t have any coverage, well they need medical services too. Here in Iowa, the best choice for a leading edge care is here at the University of Iowa, unfortuantely since this is a state hospital, people believe it is free…which it is not. Also their are people who cannot afford to pay for their bills. I just recently learned we recieve payment for 42% of the service we provide. Basically meaning UIHC doesn’t even see payment for half the services they provide. Most business would have gone to bankrupcy by now, but since it is a teaching hospital and a state hospital it hasn’t, but we have laid off over 130 just recently. Point is someone has to foot the bill and unfortuately it is the hospital and its employees, that means no raises this year, no new equipment, reduced services and less money to offer new doctors. In fact the Pediatric Hematology/Oncology department in the last year has lost 5 doctors. They are down to 3 now. So there is a reason for the high doctor bills and its not just for profit either….
August 11th, 2009 at 1:47 pm