Anthem is not alone

Do we have a sense of the underlying economics of these hikes, i.e. are they gouging or is there some justification? If the latter, the point regarding risk adjustment is still valid, but it would be good to know more context.

Oh, don't worry about it. State regulation of health insurance companies will continue its stellar performance reining in rate increases. And as you know, state regulation does just as fine a job ensuring that insurance companies' product offerings are first rate and that they operate efficiently. By golly, I sure am glad we're not getting rid of state regulation, yes I am.

They're running a business, Ezra.

If the medical costs and claims continue to skyrocket, and there is no attempt being made at controlling costs, naturally premiums must increase to keep the whole game afloat.

You might not like it, but the answer is not forcing healthier people into a national healthcare model to subsidize the ailing business model.

Perhaps the insurance game in some states has about reached its break-even point. That it's not happening in California, which also follows a defunct business model for their government finances, is no surprise.

You can't pay out more than you are taking in. Period. Else the game goes tilt, and nobody has the option of playing.

Why not work to convince those not participating in the game how much more valuable it would be for them if they too threw their premium dollars into the mix, with promises of a "covered" medical future. Of course, first you'd have to do some necessary cost-cutting, and be capable of promising with a straight face, that this is a good business model to emulate.

Didn't that same report show that the CEOs of the five largest insurance companies each earn over 24 million? For doing what? What exactly does the CEO of a health insurance company do to earn 24 million a year?

Insurance companies bring in revenues from those they cover every month and pay for medical expenses for those that they insure. It is just bookkeeping. It is receivables and payables and little else.

I'm an accountant. I'm all for accountants being payed well, but this is redicules.

Should be:

That it's NOW happening in California...

Is anyone surprised? They know they got away with gaming the system and that the ycan suck as many dollars as they want to out of our pockets and there's nothing we can do about it. A few million in scare tactics, a few billion in profits.

Ezra,

why do you continue to refer to it as "behavior"? It is NOT behavior it is cost. Once you get rid of the us against them mentality you'll see what you understood several months ago about the death spiral of insurance without a mandate:

http://voices.washingtonpost.com/ezra-klein/2009/12/draft_1.html

Or how the mandate was working in MA:

http://voices.washingtonpost.com/ezra-klein/2009/12/the_individual_mandate_is_work.html

Where did that Ezra Klein go and who replaced him with this polarized, politicized person? I'm sorry but you're spending way too much time with a goof like Olbermann who wouldn't know risk adjustment from chiropractic adjustments.

But, they holler, we don't need any stinkin' federal healthcare reform bill! Oh, no!

Absent strong legislation from Congress with a robust public option - universally offered and acceptable by all care providers - the insurance industry has won the day for the foreseeable future. They can raise rates, limit payment, exclude whomever, and generally carry on a profitable business as usual. Seems to me (but this is just one guy's observation) that we've got the insurance business getting in the way of our healthcare. Just a feeling, though.

Why is anyone surprised. As most Americans are getting poorer all the time, more and more cannot afford health insurance. Those with health problems make the sacrifice to stay insured. The healthy drop out to save their meager income. The insured pool becomes more costly and the insurer will lose money if it does not raise rates to cover the less healthy insurance pool.
If our present trend of income distribution continues, expect consistant increases in health care premiums as more and more people cannot afford insurance and drop out.

visionbrkr, it is behavior to a degree. Back in the early 90s, you'll remember that insurance companies purposes tamped down their cost increases, in part by heavy promotion of HMOs, in order to blunt support for health care reform under clinton. The claim was, "The beautiful wondrousness of the free market and health insurer innovation will create magical ponies that will make health care reform unnecessary."

The problem is that the combination of the recession and the fact that insurance companies have already squeezed as much out of the stone of cherry-picking that they could means that they're stuck raising premiums massively in the middle of the health care reform debate.

constans,

I'm sorry I disagree. Their lack of increases in the 90's was due to strong cost containment which I think should be brought back honestly. You cannot consider it behavior, just a different business model (and the old one actually worked). They're getting back to that (capitation in some states) but its happening too slowly and as you say the economy failing doesn't help.

And it wasn't just HMO's because HMO's are more prevalent now. Its HMO's that told you what you could or could not have done. Insurers have gotten way too lax in managing costs in a strict take it or leave it way because they were worried about being liked. Now they're not liked for increasing costs and occasionally denying coverage.

You can't convince me that Ezra's not politicizing this (just as the administration is) even though they all know full well what caused the rate increases and again not everyone got 39% but they don't phrase it that way for full effect. If its bad when Republicans bend the truth (which it is) then its bad when Democrats and liberal pundits do it too.

Thanks, Harry, for not playing hardball with Holy Joe.

Gawd, I hate the Dems.

We must find a way to stop healthy people from escaping their obligation to pay for the sick!

"They're running a business, Ezra.

If the medical costs and claims continue to skyrocket, and there is no attempt being made at controlling costs, naturally premiums must increase to keep the whole game afloat."

yes, they are running a business alright....monkey business.

compensation for ceo of aetna...
24,300,112

compensation for ceo of cigna
12,236,740

compensation for ceo of wellpoint
9,844,212

compensation for ceo of amerigroup
5,292,546

compensation for ceo of healthnet
4,425,355

constans, what happened to the cost-controlling HMOs of the 1990's? Why did they go away? The answer is because the public roundly rejected them, because they didn't like anyone telling them what care they could and couldn't have. People want to consume as much care as they want without having to actually pay for it. This is unsustainable.

Ezra - It might be worth noting that most of the insurance companies cited in the HHS report are non-profits. So it's not the profit motive that is causing those rate increases.

I agree with other commenters that your use of the word "behavior" is misleading. Is running a business for profit a type of "behavior"?

You continue to be good on policy but could be better on business issues.

Maybe this is the insurance company way of supporting health care reform?

jkaren, that's great, their CEOs make multi-million dollar salaries. How many members do each of those companies have?

I don't know if this will format right in the comment box, but here are your numbers with membership added, and how much ceo salary each member pays. For the five companies it averages out to $1.37 per member per year. For evil Wellpoint and their terribel rate increases it is only 28 cents per member. It's monkey business I tell you!

compensation for ceo of aetna... members ceo salary/member
24,300,112 17,500,000 1.39

compensation for ceo of cigna
12,236,740 11,000,000 1.11

compensation for ceo of wellpoint
9,844,212 35,000,000 0.28

compensation for ceo of amerigroup
5,292,546 1,600,000 3.31

compensation for ceo of healthnet
4,425,355 6,000,000 0.74

jkaren,

nice diversionary tactics. That's peanuts compared to the cost of care. You can whine about what they make or actually care about reducing cost because you could take every penny they own or ever made and still not make a dent in cost. And look, I can do it too:

compensation for ceo of Oracle:

$556,998,000

compensation for ceo of Occidental Petroleum:

$222,640,000

compensation for ceo of Hess:

$154,580,000

compensation for ceo of Ultra Petroleum:

$116,930,000

compensation for ceo of EOG Resources:

$90,470,000

Doesn't it suck that gas prices are still so high and all these oil companies are in here?

What's even sadder is that Medicare costs will rise at huge rates, but the premiums don't increase because we just borrow the money from the future. I am already saving money to pay for it.

Cost cutting is painful in many ways, but it simply has to be done. We can't continue to offer the ever more expensive innovations concocted by the providers without question. Without a change to a payment system that gives the consumer incentives to seek better value care, we all lose.

This report from HHS is ridiculous and dishonest. A quote:

"Anthem Blue Cross isn’t alone in insisting on premium hikes....Anthem in Maine had an 18.5-percent premium increase rejected by the state last year as being “excessive and unfairly discriminatory” – but is now requesting a 23-percent increase this year."

Do you know what really happened in Maine last year? Anthem filed for a rate increase of 18.5, and in the filing justified the amount based on claim experience and medical trend. The state of Maine did not dispute the experience or the trends, but they told Anthem they should price the business at break-even, i.e. they should price it to earn zero profit on the year. The state statutes allow for an insurer to earn a reasonable rate of return, and Anthem priced it for a 3% profit, a rate the state had always allowed in the past. Despite being priced for 3% due to poor experience they'd earned that much only one time in the past 5 years, and overall had lost $3.7M in Maine during that time.

The state of Maine was in violation of it's own statutes, and expecting Anthem to do business in their sate for no return, yet HHS is trying to spin this as Anthem doing something wrong.

ab13 - What is your point? What difference does it make how many people these companies cover? It is still just accounts receivable and accounts payable. Are you saying there is a link between the number of people they cover and CEO compensation? If so their salaries shoule be decreasing as the number of people they are covering decreases. That is not happening.

visionbrkr - Your point is even less relevant than ab13's. The companies you listed have actual products. They produce and deliver oil and software. Health Insurance companies do AR and AP and that is about it.

How do insurance companies make money? By collecting more and paying out less. On the revenue side that means either signing up more people (exactly the opposite is happening) or charging more per person. On the expense side that means culling sick patients, many of whom have been paying in for years, from your client base. This often leads to bankruptcy and, eventually, death of the former client. So to recap, health insurance CEOs take money from healthy people up until they are no longer healthy, then they kill their former clients. Hyperbole? Sure, but not by much.

"jkaren, that's great, their CEOs make multi-million dollar salaries. How many members do each of those companies have?"

"nice diversionary tactics. That's peanuts compared to the cost of care. You can whine about what they make or actually care about reducing cost because you could take every penny they own or ever made and still not make a dent in cost. "

watching anyone act as an apologist for this, is truly a joke.
it is not diversionary tactics.
it is immoral for the ceo's of these companies to be drawing these kinds of compensations...not to mention their perks, and to be handing rate increases to their customers.
if their companies are doing poorly (they are not) then let the ceo's take salary cuts first.
their compensations are ludicrous.
are these people indispensable? the graveyards are filled with indispensable people.
and why point to the compensations of ceos at the petroleum companies....or goldman sachs....it is wrong straight down the line, and it is that kind of greed and avarice that is destroying our country...more than anything else.
if these health insurance companies are in such serious shape that they need to impose these kinds of rate hikes, what kind of business do their ceo's have, taking those kinds of compensations.
it is indefensibly outrageous.
i dont care if it is a drop in the bucket or not...if they need more money, let the ceo's give it up first and their consumers...whose business they "appreciate" and strive to maintain....be second in line for the sacrifice.
outrageous. and even more outrageous to be an apologist for this kind of thing. believe me, it is not good for your soul to defend this kind of thing.

----"ab13 - What is your point? What difference does it make how many people these companies cover?"

The point is that jkaren listing their salaries is silly, because those salaries are not the reason for the rate increases, and have a ridiculously minimal impact on what people are paying, on average a little over a dollar a year. She's suggesting that they are gouging customers to pay huge salaries, but the facts disagree.

----"Are you saying there is a link between the number of people they cover and CEO compensation?"

No, that's not what I'm saying. I'm saying that those salaries are a drop in the bucket compared to medical costs, the true driver of the rate increases.

The rest of your comment is ignorant nonsense, the adults are having a conversation here, please go back to he kids table.

I'm not sure I understand the point of this post. It just confirms what many said the other day: the cost of care in many areas makes it difficult, if not impossible, to use private insurance to make that care affordable for individual subscribers. Government agencies may be able to delay increases but they have no real power to force a company into insolvency.

The executive compensation point is a red herring. Compensation is divorced from value in every industry -- including academia. People at the top of organizations don't look at what they are paying their own employees, they look at what others in similar positions are making.

"How do insurance companies make money?"

I'll tell you how they don't: by pricing premiums equally for the healthy and those with expensive pre-existing conditions. By forcing them to cover all comers, regardless of cost.

By treating them as a social experiment, not a business.

ab13 - Well, if anyone would know about ignorant nonsense it is you.

The question is: what do CEOs and executives of health insurance companies do to earn their huge compensation packages? Their companies don't produce a product or perform a service. In theory they insure their clients against the possiblity of future health care risk. But if they can cancel a policy, after years of collecting dues, because the formerly healthy client is now sick, than the theory doesn't hold.

And while I agree with you that CEO compensation is NOT the biggest driver of insurance costs, it is a factor. Around 30% of all insurance premiums go to pay for overhead costs (such as employee compensation - including CEO and executive compensation) and other costs that have nothing to do with paying for the health care of clients. That is a crazy high amount of money to pay for what amounts to a bookkeeping service. Crazy. Medicare covers a FAR higher number of people than any of these insurance companies and its overhead is closer to 5%. Keep in mind that Medicare is a government program, and according to republicans government programs are supposed to be inefficient.

PS - Please refrain from personal attacks.

nisleb,

if you're going to insist on giving false information in relation to medicare's costs then there's not much that we can do. THeir overhead is lower because they don't ajudicate claims. Insurers do. They don't manage costs, insurers do. THey don't show their capital costs on their books, insurers do. Sure we could take away every penny of these CEO's salaries and as you even agree to it won't be a drop in the bucket.

jkaren,

my soul, really? Listen i'd be fine with CEO's of every company not making a penny over what you or I make but the sheer fact of it is that it won't make a difference in the costs here and the administration and Ezra were irresponsible in the least by putting up figures that were not complete (it was not 39% across the board) and also irresponsible by not admitting that the reason behind this is the fact that there is no mandate for coverage.

"On the expense side that means culling sick patients, ..." - nisleib

Believe it or not, that's not all they do to reduce expenses. They spend a lot on quality and cost surveys coupled negotiations with providers in their service areas to try to bring some rationality into the cost structure. That's not easy to do when the data show that "prestigious" hospitals have demonstrably poorer outcomes but subscribers insist on using them anyway --usually "at any cost".

"The question is: what do CEOs and executives of health insurance companies do to earn their huge compensation packages? Their companies don't produce a product or perform a service."

So indemnifying people against the financial risk of health problems is not a service? Interesting.

"PS - Please refrain from personal attacks."

It is not a personal attack, it was a factual statement. What you posted was ignorant nonsense.

"Around 30% of all insurance premiums go to pay for overhead costs (such as employee compensation - including CEO and executive compensation) and other costs that have nothing to do with paying for the health care of clients."

That's not true. Although many states set 70% as the minimum to be spent on claims, most companies are currently spending well over 80%. And unlike private insurers, Medicare doesn't spend anything on teams that negotiate lower prices (for either medical services or drugs), it just pays a set price for services and whatever providers demand for drugs. That's why it's difficult to find a doctor that will accept new Medicare patients in some areas.

It's true of course that insurance companies could reduce their operating costs in other ways -- such as eliminating 800 lines for subscribers or shortening the period reps are available to explain their notices -- but all of that would still be a drop in the bucket when compared to the cost of care.

I'm not an advocate of for-profit health insurance but I don't see how people think we are supposed to pay for health care without some sort of rational approach the cost of care.

It seems to me that the people who do the most complaining aren't actually paying for their own insurance...they are outraged on behalf of their brethern who are caught in hikes like this. If we had a *universal* system in which everyone had the same deal, people wouldn't be so unrealistic about insurance companies.

visionbrkr - You just made a great case for single payer health care. Thanks. I'm kidding, mostly.

So adjudicating claims, managing costs and capital costs are worth a quarter of every health care insurance dollar spent? Really? What capital assets does a health care insurance company need? As far as adjudicating claims and managing costs, this amounts to arguing with health care providers about how much to pay for a given procedure (or wether to pay for it at all.) BFD. Most insurance companies base their payout rates on Medicare, adjudicating/managing costs is no big whoop.

I would love a study (because I generally love studies) showing the breakdown of what that 30% goes towards. If anyone has a nonpartisan one please provide a link.

Athena,

thank you for speaking the truth and not being a shark out there looking for blood. Could insurers do more, yes. Could they make less profit, yes. But when and if they did (and rate hikes aren't approved if it ever truly came to that), i don't want to hear a single liberal or progressive complain when an insurer goes under. They can't print money like the government.

Personally I think most of the complaining comes from people that have been denied due to pre-existing conditions which I don't necessarily disagree with their anger although I'd wish they'd place it where it belongs which is with the legislators that set up the system not those who are working within it.

And just soto add nisleb, Medicare denies more claims than private insurers.

you can complicate the common sense out of anything.

if a ceo can help himself to a whopping 24 million dollar bonus, then he must not think his company is doing too badly.
if a ceo can take that much money for himself, then he cant justify a preposterous rate hike for the subscribers.
there are simply rules that apply to everything, even if it may seem naive to you. the same rules apply to family finances as they do to corporate finances.
if your household finances are so bad that it is going to severely impact your children, do you treat yourself to a brand new sportscar or a fancy vacation?
no.
i am sorry. i dont see the difference.
morality applies.
these people set the moral tone for their companies.
so they skim off lots of cream for themselves and leave the thin stuff on the bottom for everyone else.
i happen to believe that right action is at the core of everything. so you can give all sorts of statistics, but something is not right when companies are making huge profits, the ceo's are taking outrageously greedy compensations, and then they cry "the blues" to their subscribers.
and then, visionbrkr said:
"Listen i'd be fine with CEO's of every company not making a penny over what you or I make but the sheer fact of it is that it won't make a difference in the costs here"

well, i think you are wrong about that. i think that if they had a stronger conscience, and more humility as to what their "true worth" really was to their company, everything would be different.
and everything would be different in this country.

"So adjudicating claims, managing costs and capital costs are worth a quarter of every health care insurance dollar spent? Really? What capital assets does a health care insurance company need? As far as adjudicating claims and managing costs, this amounts to arguing with health care providers about how much to pay for a given procedure (or wether to pay for it at all.) BFD. Most insurance companies base their payout rates on Medicare, adjudicating/managing costs is no big whoop.

I would love a study (because I generally love studies) showing the breakdown of what that 30% goes towards."

So in your first paragraph you make a bunch of baseless assertions about how insurers spend money, but then at the end admit you don't actually know anything about what the administrative costs of private insurance are used for. And you wonder why I said you were ignorant.

nisleib,

i love your phantom 30%. As Athena has stated its nowhere near 30%. Its more like 10-15% and I don't remember saying that was ALL insurers did. Among other things (AND THIS IS NOT A COMPLETE LIST) they also do disease case management, provider contracting and credentialing, step-therapy for prescriptions.

oh and that provider contracting that they do helps keep insurers fraudulent claims much lower than Medicare currently at 60 BILLION per year so ya why wouldn't we throw everything and let the government do it.

-----"i think that if they had a stronger conscience, and more humility as to what their "true worth" really was to their company, everything would be different.
and everything would be different in this country. "

And if we all could sit around singing songs, kissing puppies, riding ponies all day the world would be awesome.

-----"if a ceo can help himself to a whopping 24 million dollar bonus, then he must not think his company is doing too badly.
if a ceo can take that much money for himself, then he cant justify a preposterous rate hike for the subscribers."

You don't get it. A company can do just fine this year and still need a big rate increase for next year. The rate increase is based on the expected future claims, and when a bunch of the healthy people decide to cancel their coverage the premiums are not going to be sufficient to cover next year's claims, even though they were this year when all the healthy people still had coverage.

ab13 - I don't see you providing a link to a nonpartisan study showing the breakdown of overhead costs. You seem to think adjudicating claims and controlling costs are material cost drivers for overhead, I doubt it given the nature of the industry. Prove me wrong.

I think your claims towards my ignorance are projection and nothing more.

and furthermore, the sheer greed and stupidity of this....
the ceo's dont even care enough about the image of this as a public relations effort.....

subscribers who experience these rate hikes could probably deal with them with less outrage, if they didnt see the ceo's getting these preposterous compensations.
you would think that the ceo's might feel a sense of guilt or shame at publicly accepting these compensations during difficult economic times for their subscribers....but clearly, they could care less.
they dont even care how it looks.
it is so sad.
maybe there are just some people born without a conscience gene.
and then, we have people just being apologists for this kind of behavior that is ruining the soul of this country.
it leaves one feeling sad, angry and powerless.
and there you have the state of mind of our country, thanks to people like the ceo's of the companies that rule our world, and the politicians who are shackled and beholden to them.

"And if we all could sit around singing songs, kissing puppies, riding ponies all day the world would be awesome."

no ab13...some of us are working hard at low paying jobs and doing volunteer work in our spare time because we care about what is happening in our world.

i do get it.

So I used the Google and it routed me right back to Ezra:

"Nor is it easy to measure administrative costs among private insurers. For one thing, which private insurers? When the Congressional Budget Office examined this issue, it found that administrative costs -- including advertising and profits -- accounted for 12 percent of the average insurer's dollar. But that hid substantial variation among insurers. Among employer-based plans, the largest firms had the lowest costs. Plans covering companies with at least 1,000 employees had a mere 7 percent in administrative costs. Those covering companies with fewer than 25 employees spent 26 percent of premiums on administration. And the individual market was a mess: 30 percent."

So I was right, and wrong, depending on what market you are in.

http://voices.washingtonpost.com/ezra-klein/2009/07/administrative_costs_in_health.html

What I haven't found is a good NONPARTISAN study of the breakdown of overhead costs, on average, of insurance companies. Ezra, do you have a link?

"I don't see you providing a link to a nonpartisan study showing the breakdown of overhead costs. "

I don't need a non-partisan study, because I this is what I do for a living. I've already named some of the things insurers do, and visionbrkr named quite a few more. I can't share much information publicly, but I can tell you that the salaries of our entire executive team accounts for less than 5% of the total admin costs, so less than 1% of overall premiums. And my company is not nearly the size of Wellpoint/Aetna/etc, so those ratios are likely far lower for those companies. We spend money adjudicating claims, tons of money on disease management, on actuaries like me to assess and price risk, on underwriters who have to review medical history for every applicant, on customer service staff who takes hundreds of thousands of calls per day, on hundreds of IT professionals to maintain systems (and the costs of those systems, systems we require greater power and speed and capacity from as time goes on) and keep them up to date for the ever-changing business needs; there are a ton of expensive activities involved with running a health insurer that you have admitted to knowing nothing about, but seem all too happy to assume it is just greedy execs. This is blatant ignorance.

-----"subscribers who experience these rate hikes could probably deal with them with less outrage, if they didnt see the ceo's getting these preposterous compensations."

The fact that subscribers are ignorant of the economics of health insurance is irrelevant to whether or not the rate increases are justified.

"And if we all could sit around singing songs, kissing puppies, riding ponies all day the world would be awesome."

no ab13...some of us are working hard at low paying jobs and doing volunteer work in our spare time because we care about what is happening in our world.

i do get it.

Posted by: jkaren | February 18, 2010 2:02 PM | Report abuse

and its not as if we're sitting in ivory towers counting our millions (well CEO's are).

We get it too. We're the ones screaming loudest for cost controls. I have no problem continuing to cut insurers off at the knees in bad times but I'd just love for one for the other "players" in this fiasco called the insurance market to get a small pittance of the blame/responsibility. You know, Pharma, Doctors.

personally I think hospitals due to unreimbursed charity care is in an even worse boat than insurers.

"What I haven't found is a good NONPARTISAN study of the breakdown of overhead costs, on average, of insurance companies. "

Where do you think the money is going? Wellpoint is a public company, go see what the total compensation was for all of their execs, and compare it to total admin costs in their latest 10K.

The fact that subscribers are ignorant of the economics of health insurance is irrelevant to whether or not the rate increases are justified.

Posted by: ab13 | February 18, 2010 2:15 PM | Report abuse

there is no economics of health insurance.
it is a broken system.
and these rate hikes are not going to fix it.
nor will the next rate hike after this one.

"it is a broken system.
and these rate hikes are not going to fix it.
nor will the next rate hike after this one."

I agree. But the problem is not executive compensation, the problem is a general public who wants every treatment available whenever they want it without having to bear any of the cost. It is a problem of unlimited demand for a product paid for by a third party. None of your complaints or concerns about the industry are related to the real problems, which is what we've been trying to tell you.

nisleib,

What is it you do again that gives you such knowledge of the inner workings of healthcare and how inefficent and greed mongering insurers are?

As ab13 and I have pointed out you don't know what you're speaking about. That's not a slap or rude or a personal attack, its a fact. Just like whatever it is you do I don't know about.

All I can say is wait until May when Anthem's shown to have lost money in the California individual market and we'll be saying "I told you so" and I'm sure Ezra won't post anything about it.

visionbrkr - I'm a CPA.

I never claimed executive compensation was driving the costs of health care. Read my previous comments. I'm not making that claim. What I'm saying is this: Anybody who makes money by cancelling an insurance policy, not because of fraud, but just to reduce payouts, should not earn 24 million a year in compensation. If I pay into my health insurance for years, then get sick and have my policy cancelled, nobody should get rewarded for cancelling my policy. Indeed, whoever cancelled that policy should go to jail. I understand that every state has it's own rules regarding health insurance, and that this practice isn't universal. But it needs to stop.

ab13 - You need to work on your reading comprehension. Wellpoin'ts 10K will not tell me, "the breakdown of overhead costs, on average, of insurance companies."

-----"If I pay into my health insurance for years, then get sick and have my policy cancelled"

This is a myth created by the sensationalist media. There is a two year limit on rescission, so no one is paying for "years" and then getting cancelled, and the majority happen within the first few months. Despite the couple of cherry-picked horror stories you've read about, the overwhelming majority of rescissions are due to fraud directly related to the claim that sparked the investigation, i.e. you apply for insurance today and next week go in for 75K knee surgery.

Again, you don't seem to know all that much about this besides what you've seen in the media.

Rescission is an admittedly unpleasant but necessary part of this market as long as we don't have mandatory coverage. But in the bigger picture it's really not that big of an issue.

nisleb,

I'm with you there. I'm all for ending pre-ex and recision but as you know recision is a very rare occurence but again you're right, it should be 0%. Pre-ex is just the law as it stands and as I've said i'm all for ending it IF everyone is covered under the same system. But as as accountant I'm sure you can understand that if money coming in doesn't at least equal money going out then the system can't work. We all can't work like the government and have defecits from here to forever.

-----"Wellpoin'ts 10K will not tell me, "the breakdown of overhead costs, on average, of insurance companies." "

You've complained about executive comp, and it will give you an idea of how much that represents. You've also displayed an extremely limited knowledge of the types of activities that insurance companies do, and we've given you a bunch more examples. The breakdown you're looking for does not exist to my knowledge, but given all the things we've named, what else is it you think the money is being spent on? Which of the things that make up the admin costs would you find objectionable? The only one you've focused on so far is exec comp, which is readily available.

ab13,

Pre-ex is also a myth too because anyone covered by HIPAA has a limitation in their pre-existing condition exclusion period but hey if you don't know just make stuff up.

" the problem is a general public who wants every treatment available whenever they want it without having to bear any of the cost."

It's certainly true that people want unlimited care for nothing but I can't agree that is "the" problem.

We don't have a health care "system" in this country. What we have is a dysfunctional health financing model made up of a bunch of private and public programs that are bankrupting individuals, employers, and government at all levels.

There is no silver bullet that will magically tweak that dysfunction into a working model. Selling insurance across state lines, setting up a public insurance company, regulating private insurance companies into insolvency, etc. are all strategies to prolong denial of the fact that the cost of *care* is the problem, not insurance.

To address "the" problem, we need to accept what every other country has already discovered and adopt a universal approach to health care. It doesn't matter whether it's single-payer, all-payer, or individual payer...it has to be universal.

"Pre-ex is also a myth too because anyone covered by HIPAA has a limitation in their pre-existing condition exclusion period ..." - ab13

Sorry, but the idea that HIPAA constitutes a fix is an example of denial on the part of insurance folks. People buy what they can afford and most people who lose coverage due to a loss of employment cannot afford the options available to maintain coverage. The very name of the act "Portability" is a farce: portability means that I can keep what I have, not that I'm entitled to pay more for something else within X number of days.

Yes, there are temporary COBRA subsidies but they are just that -- temporary -- and apply to a small subset of those who find themselves without coverage.

Athena,

actually i said that but that's not what i meant. Insurers can only do subject people to pre-ex for a limited period of time. There is also a standard STATE REGULATED look back period.

See here:

http://www.statehealthfacts.kff.org/profileind.jsp?rgn=6&cat=7&ind=352

Every state is diffent but here's how to read this.

In california insurers can only look into your history 6 months to see if you were treated for something. If they can't find it then they can't subject you to pre-existing conditions for that. Also they can only exclude coverage for that condition for 6 months and then after that you're covered for it.

My point was that people that claim insurers subject them to pre-existing condtions forever just don't know what they're talking about. The laws don't allow it in most circumstances.

Again this is for small group and the individual market doesn't have this but does have guaranteed issue in some states but again as I've said they ALL should be guaranteed issue and as you agree we all then need to be accountable to be able to pay for it.

As others have mentioned on here I'd be fine with having Medicaid be an automatic entitlement when someone loses their job just so long as they get off of it once they've regained employment.

The insurance industry is certainly being ably defended in this thread.

The conclusions that the insurance company defenders present seem to indicate that the two policy choices are: to either accept the inescapable reality that the future must bring less care for fewer people, or to truly "socialize" medical care in the USA.

Or I am missing something with respect to their policy prescriptions?

ab13 - So you say I'm ignorant because I'd like to see a study showing a breakdown of insurance companies overhead costs, then you admit that no such study exists? This is why you should refrain from personal attacks; you end up looking foolish.

FYI - All those overhead costs you listed, with the exclusion of studies, are common to most all business'. It is not that I would find anything objectionable, I'd just like to know. I'm a knowledge junkie and a CPA, this is the kind of thing that interests me (how sad is that?)

My health care cost around $700 month, I'd like to be able to compare the health insurance averages to my own policy and to other industries.

Patrick,

Its not defense as much as looking for the truth as to who deserves what share of the blame.

Its amazing to me that in one side of his mouth a commenter above claims insurers do nothing and they're only "AP and AR" people so why do they deserve salaries that they CEO's get and in the other side they're to blame for the escalating costs. You can't have it both ways if you agree that executive compensation is not the main reason for cost. As VP Biden said "you're not entitled to your version of the truth".

I, myself would be fine telling doctors and hospitals that they will receive "X" for a given procedure as they do in other countries. Do you want to tell the doctors that or should I? Oh and it is about time someone cuts pharma off at the knees too. 20% profit NEVER gets mentioned around here. Its always the 2-3% that insurers make.

"I, myself would be fine telling doctors and hospitals that they will receive "X" for a given procedure as they do in other countries."

Thanks, visionbrkr. I agree with you that insurance company profits (and executive salaries) are not the sole problem in the inflationary spiral of health care costs in this country.

I am hoping to hear ideas (like yours) about other strategies within the existing system where the inflation of HC costs can be better managed.

-----"So you say I'm ignorant because I'd like to see a study showing a breakdown of insurance companies overhead costs"

No, I've said you were ignorant (which is not at all an insult or "personal attack", it just means uninformed) because you were expressing a very naive view of what it is that insurance companies do and spend money on.

-----"All those overhead costs you listed, with the exclusion of studies, are common to most all business"

Really? Most companies employ a bunch of actuaries and statisticians? Most companies employ underwriters? Most companies have to maintain and update IT systems to deal with volumes that significantly outpace general inflation/business growth? I could go on with even more very resource intensive activities that are necessary to operating an insurer as well as being somewhat unique to the industry.

Tell you what, I have a document lying around from an expense review last year that breaks down our expenses into a few major categories like "Claims Admin", "IT," Underwriting", "Customer Service", "Legal", "Executives". I probably shouldn't be sharing it but if I can find it I'll give you that breakdown. I've been in this industry for a long time, and have pretty extensive knowledge of operational needs, unless you think visionbrkr and I are arguing in bad faith I don't know why you're so eager to doubt that insurers are spending money on vital activities.

visionbrkr - Good point on Pharma.

The way I look at it is that the USA is subsidizing the rest of the world's drugs. If every other industrialized country does collective bargaining and, therefore, pays a fraction of what we do for drugs, then we are subsidizing global drug prices. I agree that pharmaceutical companies need to make a profit, but that profit should come from everyone they sell drugs to, not just the citizens of the USA.

That said, I'm the one who said health insurance companies are, when you get right down to it, bookkeeping firms. I did not, however, claim that executive compensation is driving the costs of health insurance.

-----"I'm the one who said health insurance companies are, when you get right down to it, bookkeeping firms."

I disagree pretty strongly on that one. Insurers are supposed to protect against unforeseen risk. To the extent that they are viewed as "bookkeepers" or just passing through money, that is because we use insurance to pay for way too much routine and predictable care. When it comes to paying for cancer, heart disease, accidents, and serious illnesses they are not all bookkeepers, they are indemnifying you against severe financial hardship. But since people expect health insurance to pay first dollar for every sniffle and sprained ankle, then yes they become pass-through agents to some respect, but that is a big part of the problem. I don't want insurance to serve that purpose, because it is a perversion of the very definition of insurance.

ab13 - Interesting. So do you think routine and predictable care should be payed for by individuals or the government? It sounds like you think health insurance should be for only big, serious ailments. In my opinion that is more of a catostrophic care policy than a health insurance policy, but whatever.

The problem is that the things many of us consider small and unimportant end up being anything but. Stories abound about people feeling a twinge in their left arm, a tickle in the back of their throat, or some other small annoyance and ignoring it, thinking it will go away on its own only to find out later that it was something serious and that if they only had gone to the doctor sooner they would have been allright. This often ends up costing the insurance companies (if they don't cancel the policy) huge sums of money.

Or, in other words, most of us are not doctors. We don't know when something is serious and when it is no big deal. We err on the side of caution and go to the doctor. I pay around $700 a month for my health insurance and hate going to the doctor, but if I feel like I'm getting sick I go because I'm paying a 100 times more for health insurance than I'm consuming in health care benefits.

nisleib,

you see that's the point. You forgot about pharma because they're not the bogeyman that insurers are for whatever reason. You also forget about doctors who make 7-10x in the US what they do in other countries. Sure they have some more expenses but has anyone ever seen a doctor go bankrupt? hospitals yes, doctors NO.

niselib,

now that's where you're wrong and ab13 is right. Insurance shouldn't pay for the routine stuff just like car insurance doesn't pay for oil changes. Preventative care is different because that is designed to catch things before they become a problem.

"So do you think routine and predictable care should be payed for by individuals or the government? It sounds like you think health insurance should be for only big, serious ailments. In my opinion that is more of a catostrophic care policy than a health insurance policy, but whatever."

By the individual, with limits on a percentage of your income you should have to spend on health care. Insurance that pays for routine things is not insurance. You're essentially just pre-paying for the routine care with some admin expenses on top. It would be cheaper to just pay for that stuff out of pocket and save insurance for the big ticket items.

"Or, in other words, most of us are not doctors. We don't know when something is serious and when it is no big deal. We err on the side of caution and go to the doctor."

Sure, but when a third party is paying there is no way to constrain costs, since neither you nor the doctor have an incentive to do so. The doctor will prescribe every test because why not? The insurer is paying and the patient gets to feel like the doctor did something for them, even though the doctor knows it probably wasn't necessary. If people were paying their own money for that stuff it would behave more like a market, and there would be cheaper options available. (Of course I am not suggesting things like cancer or emergency treatment are conducive to market forces, only routine care).

visionbrkr - I never forgot about Pharma. I think we, as citizens of the USA, should get the same deal everyone else in the world gets. We aren't. The case can be made that we are subsidizing our worst enemies pharmaceuticals, indeed that is the case I've made.

I'm fine with insurance paying for only catastrophic care, but that is not the common understanding of health insurance. That is known as catostrophic health insurance, and such plans are available in many states.

ab13 - I see what you are saying, but that is not how health insurance is marketed.

Do consumers and doctors share blame for unneccessary treatments and routine care? Sure. Of course they do. For goodness sake, there is not just one culprit that is messing our health care system up, this is a collective cluster bleep.

But that doesn't change the fact that what you are describing is not what we are being sold. Most people get their insurance through work. They are told what their co-pay will be when they take the job, often the quality of the insurance is a big factor in choosing one job over another. That is not the fault of health insurance consumers, it is a facet of how our system works.

"The way I look at it is that the USA is subsidizing the rest of the world's drugs. If every other industrialized country does collective bargaining and, therefore, pays a fraction of what we do for drugs, then we are subsidizing global drug prices." - nisleib

In other words, you've bought Pharma's lie and are happy to leave them out of the equation.
The US isn't subsidizing other countries, it's subsidizing Pharma profits. Pharma spends more on advertising its products in the US than in research. Most of the research that results in marketable products comes from government paid research.

Athena - I haven't bought into their lies. Yes, they are a problem that needs to be dealt with. What have I said that makes you think otherwise?

"The US isn't subsidizing other countries, it's subsidizing Pharma profits."

Like it or not Pharma needs to be profitable. You don't have to be an actuary or a CPA to realize that. But should their profits come only from the US? No, they sell their products globally, therefore their profits should be global.

I don't really want to be a defender of Big Pharma, but I disagree with some of what you've said Athena. A substantial portion of what is called marketing or advertising is actually free samples that they give away, since they have to account for those at the retail price. I think it's terrible the amount of "ask your doctor if you need this drug" type advertising they do, but I think they also get somewhat unfairly maligned for spending too much on advertising when much of that consists of giving things away for free.

As for gov't research coming up with all the drugs, I believe that is incorrect as well. This is source I usually point people too when they say that:

http://pipeline.corante.com/archives/2004/09/09/how_it_really_works.php

"But that doesn't change the fact that what you are describing is not what we are being sold. Most people get their insurance through work. They are told what their co-pay will be when they take the job, often the quality of the insurance is a big factor in choosing one job over another. That is not the fault of health insurance consumers, it is a facet of how our system works."

This is driven by the tax preference for employer-provided insurance. Remove that distortion and people would see what it really costs to provide all of this comprehensive first-dollar coverage, and maybe they'd think twice about having insurance that pays for every sniffle.

ab13 - "...maybe they'd think twice about having insurance that pays for every sniffle."

The vast majority of people have no choice whatsoever in what kind of health insurance they have. They get it through their work. The only chance they have to "think twice about having insurance that pays..." is when they first take the job.

Health insurance companies can sell catastrophic coverage in many (all?) states. Most people, and most businesses, don't want insurance that only works when something major goes wrong, they want health insurance that pays for their health care when they get sick. Personally, I assume that the $700 I pay every month will take care of the one or two times a year that I go to the doctor.

As to the tax benefits, well, maybe you are right, but I doubt it. We Americans tend to want what we want when we want it.

But wouldn't you rather keep that 700/month and then just pay out of pocket for the minor things that pop up? Do you utilize 700/month worth of health care?

I'm not disagreeing that most people don't have a choice, which is why we need to end the special tax treatment of employer-provided health insurance. Then they WOULD have a choice.

"As for gov't research coming up with all the drugs, I believe that is incorrect as well. This is source I usually point people too when they say that:"

I just read The Truth about Drug Companies by Marcia Angell in which she discusses the sources of pharmaceutical research. While drug manufacturers do conduct research, they are primarily marketing and distribution operations.

Also contained in the same report by the Department of Health and Human Services:

"WellPoint and others claim that the premium increases are necessary given the rise in health care costs. While rising health care costs is a known problem with our broken health care system, some of the premium increases requested by insurance companies are 5 to 10 times larger than the growth rate in national health expenditures. All the while, insurance companies and their CEOs continue to thrive.

Recent economic data show that profits for the ten largest insurance companies increased 250 percent between 2000 and 2009, ten times faster than inflation. Last year, as working families struggled with rising health care costs and a recession, the five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion, up 56 percent over 2008. These health insurance companies’ profits grew even as nominal GDP decreased by 1 percent over this same time period. WellPoint accumulated more than $2.7 billion in profits in the most recent quarter alone."

Patrick,

what you're not seeing though in that slanted report is that individual insurance routinely LOSES money for insurance companies. Why should they be REQUIRED to lose money there because they make up part of it elsewhere? Don't look at dollar amounts that inflate themselves by sheer size. Look at percentages. last year insurers profit margins were 2-3%. Forcing them to lose money on individual business because they make some profits in other markets is like forcing a car company to continually lose money on a specific model. We don't force that for auto companies so why would we do so for health insurers?

I would agree with Athena too about drug manufacturers. Too many of them will just slightly alter a drug near the end of their patent years so that they can get another large block of time at an exorbident price. Again I'd be fine with basically making insurers private utilities (we're almost there already) but if we do that then we should also rein in the other culprits in cost (doctors and pharma). And while I could agree that nisleib doesn't absolve pharma of blame you can't dispute the fact that it is NEVER talked about around here or any other medium for that matter. THey get the free pass of all free passes when their cost of healthcare has increased substantially over the last 5-10 years in conjunction with their ever rising profits.

From the HHS report: "WellPoint accumulated more than $2.7 billion in profits in the most recent quarter alone"

$2.2B of that was from the sale of a PBM subsidiary and had nothing to do with their insurance business. That 2.2B also accounts for half of that "56% increase in profits" for the 5 companies. And that 56% increase is comparing to the recession in 2008. But why let little things like facts get in the way of unfairly demonizing insurers?

It's a business, Ezra. Don't you get it? It's less about healthcare and more about making money. That's why we have, according to the Republicans, "the best healthcare system in the world."

The utility company goes before the State Utilities Regulator every year and asks for a rate increase.

That doesn't mean it's going to happen.

The empahasis should be less on the requests made and more on the state insurance regulators who approve the increases.

Insurers cannot arbitrarily increase rates or change coverage while the contract is in effect.

During negotiations to renew, insurers can ask for whatever they want (and should) - that doesn't mean they will get it.

In the end, the STATES have all the power - not the insurers.

Doesn't HHS know this?

All capitalism is monopoly capitalism.

And capitalism by definition is theft.

What else do you need to know?

I find it interesting when a few posts tell us it's a business, companies have over head. WOW. They must have been dropped on their heads when they were born. They have over head for sure, EXCESSIVE GREED, living the high life. This is what Capitalism is all about. The theory of letting the market work is really working isn't it, I know, let's deregulate more, the GOP brain storm.

Lets add some realism to this pay debate. There are about 300mm people in the US, 250mm have health insurance, 60mm are enrolled in medicaid and 45mm enrolled in medicare. That means that about 145mm people are covered by private plans and

jkaren supplied their compensation below

compensation for ceo of aetna...
24,300,112

compensation for ceo of cigna
12,236,740

compensation for ceo of wellpoint
9,844,212

compensation for ceo of amerigroup
5,292,546

compensation for ceo of healthnet
4,425,355

So with a total compensation of about $56 million, spread over 145 million insured, these guys are costing us less than 40 cents per person per year. Since we are talking about premiums in the thousands of dollars per year, these pay numbers arent even a rounding error. Please stop bloviating about pay!

So, ab13, which health insurance lobbying group do you work for?

There is a national health care program that is controlled by the Administration, it's called the FEHB (Federal Employees Health Benefit) plan. One of the plans within FEHB raised its rates 33% this year, others, much less so.

If the Federal Government is so good at limiting rate increases, why can't they keep a lid on their own programs?