Wall Street Weekly | 08/21/2009 9:30 am
Bullies Threaten Insurers; Is Profitability a Crime? by Liz Peek
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Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 8/17)
Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.
In Washington’s sandboxes, the bullies are gaining the upper hand. This week’s news that Henry Waxman and Bart Stupak of the House Energy and Commerce Committee had written letters to 52 insurance companies demanding reams of information about compensation, client entertainment, executive retreats and other data was so dismaying. Unable to advance health-care legislation or tame an increasingly hostile electorate, Congress has decided to beat up on health insurers – Nancy Pelosi’s favorite "villains."The letters are, of course, showboating – much of the data sought, such as the compensation for the CEOs of the largest companies, is already in the hands of the SEC. No, Waxman and Stupak aren’t after information. The real play here is to threaten the industry with embarrassing exposure, so as to prevent them from resisting President Obama’s No. 1 agenda item. It’s disturbingly Orwellian. House Democrats have seen how effective it is to loose populist anger against an adversary; who will ever forget the mortifying Congressional assault on poor Ed Liddy, the fellow that stepped in to help sort out AIG and was absolutely excoriated for his troubles.
Ironically, as The New York Times and others have reported, the insurers, led by lobbyist Karen Ignagni, have been on board with reform from day one. Ms. Ignagni, CEO of America’s Health Insurance Plans, must have been pretty darned surprised to have her industry come under attack. She had already guaranteed the president that the companies would agree to not deny coverage to clients with pre-existing conditions and to discontinue basing premiums on a person’s health status or gender – the two most important concessions that Obama has requested. Presumably the insurers do not welcome a government-run competitor, and will argue against that part of the proposal. Since many of these firms are publicly owned, management could be sued for not attempting to block legislation that would be harmful.
The attack on the insurance industry is worrisome mainly because it is yet another in a series of anti-business outbursts from the Obama camp and its Congressional allies. What is the industry’s crime? The president accuses the industry of being profitable, and indeed "making record profits" – as he stated at a recent press conference. (Actually, profits for the industry are down from the 2006-2007 levels.) What kind of charge is that?
The president and his reform teammates have implied that insurers are earning unconscionable profits on the backs of unfairly treated policyholders. Otherwise, the reasoning goes, how could an industry be so successful? That conclusion mandates the question – just how profitable are insurers? According to Fortune magazine, not as profitable as Internet sales companies, or pharmaceuticals, or railroads or telecommunications companies. In fact, in Fortune’s listing of industry by profitability, health-care insurers and managed-care companies came in 35th with a profit margin of 2.2%. Yes, the top ten companies last year earned $13 billion; it is a huge industry – the aggregate number, often quoted by reformers, doesn’t mean a thing.
For sure, we all have issues with our insurance companies. They are an easy target. But trying to develop important and complex legislation by demonizing companies that employ Americans, pay taxes and provide an important service does not reflect well on either the president or on Congress.
The Obama administration’s desperation to drive through health-care reform may reflect their anxiety about the economy. After all, coming up to the midterm elections, they have to have something to show for their control over all three branches of government. It must be driving them crazy that for every data point showing that a bottom has been reached in housing or manufacturing, there is a little hiccup showing that the consumer remains in lock-down.
Read more about: Barack Obama, Bart Stupak, Business, Ed Liddy, Government, health care, Henry Waxman, Karen Ignagni, Liz Peek, Nancy Pelosi, News, Politics, U.S., Wall Street Weekly
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How do those geniuses do it? How can they pull such profits out of a business designed to “spread the risk”?
The answer, my friends, is from the old adage: Buy low and sell high. The premiums they sell are the highest in the world, but of course they will tell you we have the “finest health care in the world.”
Profit lies between expenses and income, and these companies do, frankly, have a lot to buy: hospital costs, doctors fees and salaries, some drugs and, of course, politicians.
The amount of soot they throw into our eyes is matched by the silver they set before the members of Congress — an amount which could be called obscene.
They try to keep profits high and expenses low by not spreading risk, but by
avoiding risk: change your job, discover a “preexisting condition,” and you will quietly be deleted.
What is not being emphasized enough, in my opinion, is the huge amount of medical costs we taxpayers already pay, and is avoided by the insurance companies: all the health care in prisons, the emergency room visits by people who cannot afford regular care, medical indigents, people on disability, armed forces, personnel and their dependents, veterans and those covered by Medicare only.
There is the dawning insight that if members of these groups could get adequate care, particularly preventive care (and this varies a lot), the health care costs borne by taxpayers could be reduced.
For decades, the insurance industry has been fawning over and flattering people in white-coats, telling all of us how wonderful our United States health care system is, as the truth drifts further and further from this fantasy. What they hate is anything that would expose the truth of their operations, such as a federally run program.
The truth is, no one can make a huge profit without a big gap between expenses and income. You see, it isn’t like rocket science, it’s, like, greed."
William Durbrow III, MD
I found this take from a person who used to do PR for an insurance company quite enlightening.
http://www.commondreams.org/view/2009/08/17-13
For someone with "MD" after their name, you certainly don’t know much. Sir, why is it a crime for any company in America to make a profit? Isn’t that pretty much what all of this boils down to?
If health care in this country isn’t so wonderful, then why are people coming from Canada and the UK for treatment? Treatment they can’t get in their own country.
Are you not aware of the numbers? Sir, please, allow this statistic (I have Multiple Sclerosis, Migraine Disease, oh and I’m a black woman) to educate you a little. When people become ill in England, there IS a waiting period. Cataract Surgery - 8 Months, Hip Replacement - 11 Months, Knee Replacement - 12 Months, Slipped Disc - 5 Months, and Hernia Repair - 5 Months. Prostate Cancer survival rate in the USA-5 years is 100%, the UK is only 77%. Daniel Hannan, a member of European Parliment said, when asked why government run health care is so important replied, "It’s the single biggest employer in our government. It’s the 3rd largest employer in the world."
Look, I’m not trying to be a little smarty pants. I’m attempting to open your eyes. I’m amazed everyday by those who have so much to say about this bill, and they haven’t even attempted to read it. Sir, I have. Have you? Are you aware that on page 241 lines 6-8, "Doctors (YOU), doesn’t matter what specialty you have, you’ll ALL be paid the same."
I doubt many people share your empathy with the insurance companies. There are far too many horrific stories on the world wide web and in our own communities . If the government can shake their trees in any way, shape, or form, I applaud it.
"But trying to develop important and complex legislation by demonizing companies that employ Americans, pay taxes and provide an important service does not reflect well on either the president or on Congress."
An " important service".? Uh-huh. Try selling that to the millions of Americans who were dropped by that "important service" and/or fed miles of red tape and medical babble when they were critically ill.
Just how prosperous is big insurance right now? Many people aren’t aware they have a choice of insurers. 75% of Montana is covered by Blue Cross. Grassley’s Iowa is covered at 71% by Wellmark. Olympia Snowe’s Maine is 78% , covered by Well Point. In nine states a single insurer covers 70% or more of the state. In Hawaii, one insurer covers 78%; in Alabama, it’s 83 %. In 17 other states, one insurer covers at least 50%. So, it appears insurance companies are quite fat, happy, and aspire for those percentages to grow enormously by carving out more sections of the country for themselves …. unless, of course, they had to grapple with government competition in those states. Now, wouldn’t that be a pity party if they had to share?
I would like to see an investigation into executive compensation and other "business as usual practices" inside that industry. Why not? What do they have to hide? Apparently something, since WellPoint, UnitedHealth, and Aetna are all silent and have no comment.
Insurers and corrupt government have colluded to limit the number of insurers in certain states. With over 1000 insurance companies in the US - government should get out of the way, and let those companies compete for my business. We’ve ended up by default on state health insurance and in the words of my doctor, it is "horrible."
I agree.
Stacy S —You and Bella are absolutely correct. Every business, large or small, has the same problem. We have been blessed with our coverage for our employees. However, we have had to change carriers several times. And, you are right, we are limited in our choices. Our business, and several businesses like ours, would love a co-op where we could band together and offer our employees an even better product and the cost would be lowered. And, if we could cross state lines to buy insurance that would be a God Send for us. We have never had an employee turned down for a pre-existing condition. One of our salesmen had a teenager with Cystic Fibrosis —she needed a lung transplant. The insurance company not only found her a lung, they also flew her and her family on a private plane, to a hospital in Alabama for her transplant. Paid for a member of the family to stay with the girl, and later, flew them home. That was five years ago - she has now graduated from nursing school and is a fine healthy young woman. Granted, there was a lot of paperwork, however, it speaks volumes about the company. And, that company is BCBS. They employ over 3000 people in this city. I would hate to see 3000 people out of work to add to the ever growing number of unemployed we have in the State of Florida. The insurance we provide for our employees is expensive for a small company and we would like to have a lower cost - but if it means we must forfeit excellent care for lower costs - we will not do so.
In Florida auto insurance companies are a dime a dozen. Many to choose from. Home insurance is another matter. State Farm was the biggest carrier in the State. This year they announced that they would be pulling all coverage out of the State of Florida. Attributing it to hurricanes. So, we have had to scramble, as most Floridians to find another carrier. But since there are many to choose from it was not a difficult task.
I don’t know about other states but in Florida we have an Insurance Commissioner who regulates the Insurance Companies in the state. Many have been fined and are no longer allowed to offer insurance in this state.
Please, read the health care bill. I’m kicking myself not writing down where it can be found, for I’ve taken the time to write down other things that were found in it. For example:
Pg:50 Section 152 - will provide to ALL NON U.S. citizens, illegal or otherwise
Pg:195 Officers & employees of the government will have access to ALL Americans financial & personal records.
Pg: 241 Lines 6-8 Doctors, doesn’t matter what speciality they have, they’ll all be paid the same.
Pg: 335 Lines 16-35 & Pages: 336-339 Government mandates establishment of outcome based measures.(in other words, It’s health care the way they want)
Pg: 354 Section 1177 Government will decide which health care conditions will be paid. (this is rationing)
***The one I’m kicking myself for not writing down the page. If the government doesn’t like the insurance you have for yourself through your work or a private insurance company. You will be fined 2.5% of your total gross income.
If the government isn’t "impeding" our choice, then why are we going to be fined if they don’t like "our" choice of insurance? If they aren’t "impeding" our choice, then why are they going to fine the small business owner?
Go to www.examiner.com and in their search window, type in "health care bill 3200". You’re going to get a lot of choices. One will be the actual bill to read online. Don’t worry, you’ll be able to enlarge the window so you can read it much better. At first, it can be a difficult read, however, this is our future, don’t give up. Don’t act like many of those in Congress and not read the bill. Be informed, read the bill and learn the truth. Your eyes will be opened.
Isn’t it sad how they think it’s funny, to tell you to go have another cup of tea? When I see the name, Phillis, or however she spells it, I think of that horribly ugly Diller woman. What ever happen to her? Didn’t she just fade away? Or did she just die all alone? Oh, not important.
I’m finally at the point in my life that I care about this country. I have old fashioned values. And it still surprises me when I see people who don’t care. I’m amazed at how they continue to assume and insist that no one but them has a brain. They insist that I haven’t read the bill, when I have. And when anyone brings up an important point, they completely ignore that point and attempt to attack that person on something they deem to be personal. Like what they just tried with you.
I just wish people would stop and realize that we do want health care reform. The entire system doesn’t need a complete overhaul. Just fix what’s broken. Don’t put the entire country on government run health care. Neither Canada or England thought they’d have what they have now when they first started out either. And stop telling me that’s not what Obama wants when I’ve heard him say it. I’ve seen him in interviews where he’s said it. But of course the media isn’t playing any of those are they?