Tuesday, March 2, 2010

The Insurance Money Game

Insurance companies have been raising the cost of premiums and blaming the hike on medical costs. Firedoglake [FDL] shows how the insurance companies are lying to the American public.

The insurance companies have been taking an incredible amount of heat lately for their stunning rate increases. Anthem kicked things off with their 39% increases in California, but these were not isolated hikes. WellPoint, Anthem’s parent company, is increasing rates by double digits in at least 11 states. And other big insurance companies are hiking rates in at least half a dozen more states.

Insurance company CEOs have been called to testify before Congress, with more hearings to come. This has put the industry on the defensive and they’ve taken to the media to deflect criticism and explain their rate hikes. Their spin centers on one talking point, elucidated by Angela Braly, CEO of WellPoint, in today’s Wall Street Journal:

WellPoint Inc. Chief Executive Angela Braly is facing her biggest test yet as the nation’s largest health insurer comes under fire for its plans to raise rates as much as 39% in California.

So far, Ms. Braly has chosen to fight back. Instead of issuing a Toyota-style apology, she is turning her critics’ argument around, citing rising health-care costs driven by doctors and hospitals, which she says aren’t addressed by current health-overhaul bills.

The strategy, on display last week during a contentious House hearing focused on the rate increase, could get another airing Wednesday, when Ms. Braly and other top health-insurance executives are expected to appear before the Obama administration’s top health official to discuss health-care premiums.

The idea that insurance rate hikes are driven by increases in the underlying cost of medical care has also been pushed by AHIP, the insurance industry’s top lobbying front group.

Given the health insurance industry’s duplicity on everything having to do with the health care system and their role in it, it shouldn’t surprise anyone to find out that this talking point is a straight up lie.

A new report from Health Care for America Now sets the facts straight [pdf]. As Richard Kirsch, National Campaign Director, explained to reporters on a call today:

From 2000 to 2008, insurance premiums went up 97% for families and 90% for individuals. In the same time period, payments to providers like hospitals and doctors only went up 72%. Even worse, underlying medical inflation, calculated from the Consumer Price Index, went up only 39%.

In short, over the last eight years premiums almost doubled, but medical inflation went up only 40%. Premiums rose two times faster, and over three times faster than wages, which only rose 29% in the same time period. [...]

So while it’s true the cost of medical care is rising faster than inflation, and it’s also true doctors and hospitals are making more profit than they used to (the difference between medical inflation and what insurance companies pay to doctors), insurance companies are raising their rates much faster than even that - over 20% faster than the amount they are paying doctors and two times the amount the underlying cost of care is rising.

To put it another way, insurance companies are making more profit than ever (and they are making record profits) because they are raising their prices faster than their costs.

These rate increases are all part of the insurance industry’s plan to squeeze more profit out of your premium dollars.

The underlying cost of medical care is not driving insurance rate hikes. Greed is the singular driving factor at work. And our health care system must be reformed to fix this glaring, deadly problem.


The insurance companies have fired back, taking issue with the data used to determine the rate at which health insurance rates have climbed. To determine these rate increases, the report used data from the Kaiser Family Foundation, the gold standard for this type of informationgoing back many years. It goes without saying that we stand by the data and the report’s conclusion.

Which means they have more money to spend on perks. For example, Anthem spent $27 million on 103 executive retreats to places like Hawaii in 2007 and 2008 alone. In fact according to the report, from 2000 to 2008 insurance companies spent $716.4 billion of premium dollars on administrative costs, CEO salaries, and investor profit, almost enough to pay for the entire health reform bill.

It's time to change the system and take the profit out of health care.

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