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Wall Street Weekly | 08/21/2009 9:30 am

Bullies Threaten Insurers; Is Profitability a Crime? by Liz Peek

© Shutterstock

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.

591 Reader Comments (so far…) Sign In or Register to comment

Amelie Poulain

I agree with you.  It is shocking the amount of irrelevant, unrelated BS they stuff into a bill in order to "appease" the various regions and their powerful lobbyists.  The very corruption you endured for 8 years is going to take a long time, if ever, to change. YOUR HEALTH CARE BILL should be about a page long. It frightens me a lot —the potential for abuse and further corruption, and my prayers are with you all that you have a solid realistic resolution for the greater good of all soon!

 

And no,  Canada’s wasn’t implemented in a few days either.  Saskatchewan was the first "sample" province to have it put in.  Just 1/10 regions to start with.  In the USA, the model of veteran’s care seems to be pretty good as a starting point.  But I’d like to see California to start with since they are on the verge of collapsing, then add states into the mix.  I was born in Sask. and I remember being held over my mother’s head screaming my head off as all the women in town demonstrated for Medicare. Google Tommy Douglas if you are curious. He is the "father" of the medical system up here and its ideals. 

By Amelie Poulain on 08/25/2009 1:19 pm
Elle Troy
I’m so tired of hearing that the Democrats are trying to appease the Blue Dogs and Republicans.  I say @#(*&$#@ kumbayah and just ram it through any way possible.  We have a majority.  It’s time we started acting like it.
By Elle Troy on 08/26/2009 7:45 am
Amelie Poulain

In a way you’re right Elle.  The ‘Twain shall never meet. Ever.  But until there is a family crisis in every GOP’er family, whereby they lose their fortune to medical bills as a result of being denied the right to survive an illness by an insurance company, they will not understand the compassionate gesture of having a national system.  Even millionaires deserve to keep their money right where it is…in their own bank accounts. 

 

PS: What’s a blue dog? 

 

By Amelie Poulain on 08/26/2009 11:59 am
Elizabeth R

One possible solution to the healthcare issue may be on the table somewhere, but I haven’t heard it debated or read much about it.  There may be excellent reasons why this idea wouldn’t work and I’m sure I’ll hear them, which is fine.  The idea:  what if we expanded our two existing "public option" healthcare programs, Medicaid and Medicare?  Medicaid eligibility could be expanded to cover the unemployed and uninsured up to age 54 and Medicare to cover those 55-64.  This would accomplish near-universal coverage of those who are not covered now and allow those who are happy with their plans to keep them.  People who lose their private insurance because they become seriously ill and exhaust their benefits or cannot afford the premiums (based on income and family size) could become eligible for one of these programs depending on their age.  

For sure, this idea doesn’t directly address the increasing costs of private health plans, or the impending insolvency of Medicare—which is a whole different issue—but perhaps the "threat" that significant numbers of people could leave private plans if premiums continue to rise beyond their ability (not willingness) to pay would help to hold down the unreasonable increases of the past few years.  Premiums for the "Expanded M" programs would be based on income and family size for those under 65 so that higher-income participants would be required to pay more.

Building on existing programs could save the money that would be required to establish a new public healthcare bureaucracy.  Regardless of how much we may like or dislike Medicaid and Medicare, they already have experienced staff, administrative structure and supporting technology.  This plan would provide a "public option" for those who need and do not have coverage, while the basic structure of the existing private, employment-based system stays in place—at least for now.  I still believe that our current system is not sustainable and that some kind of "public option" is necessary, but an interim system that marries the two could be a more pragmatic approach considering today’s economic conditions.

By Elizabeth R on 08/25/2009 9:22 pm
Elle Troy
For those who don’t want health care reform: what’s YOUR solution? 
By Elle Troy on 08/26/2009 7:44 am
Star Lawrence
We want reform—just not replacement with some humongous boondoggle involving the govt making life and death decisions with their power of the purse, having the IRS collect premiums and have access to bank accts, and just plain imposition of the usual govt idiocy in this delicate area. This means surgical (um) inclusion of the uninsured in the system through pinpointed regulations. Many proposals are floating around to do this. All have unintended consequences—but the unintended consequences of this grotestquely expensive mess would be far worse.  
By Star Lawrence on 08/26/2009 11:12 am
starry Nite

Health care Reform bills being proposed do not include any of the myths(lies) that are being floated around.

 When presented with the facts opponents often say- well I just don’t trust the government.  Why?   You are getting your social security checks and Medicare still works..  They have not yet folded and none of the scare tactics used to prevent passage have happened.  No one has to wear dog tags.

You do not have to sign up for the plan.  If you have insurance keep it. The public option is for people who can not and do not have insurance.

Businesses can not drop employees into the public option.   Small businesses who qualify can give their employees insurance through this plan.  

The English and Canadian health care system is being bashed for no good reason.  Health Reform uses our existing system just adding a public option. .  Most of the Canadians and English people like their system.  They all have health care and private insurance is available.

By starry Nite on 08/26/2009 5:42 pm
darcus g
I am so worried that the insurance companies are being treated unfairly…  NOT!!!
By darcus g on 08/28/2009 3:41 am
C jay
"And doctors despite many expectations to the contrary are human beings." Please tell them to act human. When there is a mistake or neglect, they refuse to discuss it, almost forcing patients to secure a 3rd party, to ensure "it" never happens to anyone else much less them again, and they flaunt their greatness, by creating exclusive rights to patients information, yet block any signs of their own humanness, much less their existence. Doctors did not do that much prior to 30 years ago, when corporate, non-medicine blokes stepped in with their MBAs to ‘fix’ things for them, but, Dr. Weil, they all permitted it.  

Do any health professonals and/or RNs here remember when returning military took over "ward management" from RNs, had their tuition paid to "learn" to a PA? Business in medicine grew along with the male, military model of medical training.

Most regions used to have councils of governments that determined when a health facility could purchase a new hyperbaric chamber, MRI,  etc. No longer. Now its competitive management, and those instruments must be kept busy with patients’ bodies to pay for them in every "health facility" in the nation! Business again! Not patient care!

Its how many tests must be done, how many MRIs, how many invasive procedures to pay for the technology a "health facility" bought to be competitive - competetion is always HEALTHY?

The average American must be taught to NEVER ACCEPT a prescription to take home with them without first demanding to know, "What lifestyle changes do I need to make to perhaps avoid taking this drug?" And, the doctors must be ready to tell them, precisely what to do, and how.
By C jay on 08/28/2009 10:39 pm
C jay

Chargined - I pasted something I did not realize I had copied. So, double - added. Sorry everyone.

By C jay on 08/28/2009 10:40 pm
C jay
Opps. Someone just asked me - just the first part was pasted in and I didn’t see it! ;0)
By C jay on 08/28/2009 10:57 pm