Sebelius: Did You Say Record Profits and Premium Increases?

In a post last week, “Insurers’ Profits Swell, Nation Can’t Afford to Get Sick, Can’t Afford to Get Well,” I noted with some distaste that health insurers were said to be looking “for premium increases amidst what [Reed] Abelson describes as ‘flush’ reserve coffers and shareholders ‘rewarded with new dividends.’”

As you might have gleamed from the title of the post, the primary reason for the increased profits was thought to be attributable to “a recessionary mindset” which has led to the insured deferring treatment and thereby not utilizing their health insurance benefits.

As I noted then, despite record profits now, “someday there might be a rainy day” [was/is] a common refrain/justification among insurers.”

Apparently, the Obama administration was none too thrilled with either the prospect of double digit premium increases or the justification. The New York Times reports that

Kathleen Sebelius, the secretary of health and human services, issued a final rule establishing procedures for federal and state insurance experts to scrutinize premiums. Insurers, she said, will have to justify rate increases in an environment in which they are doing well financially, with profits exceeding the expectations of many Wall Street analysts.

“Health insurance companies have recently reported some of their highest profits in years and are holding record reserves,” Ms. Sebelius said. “Insurers are seeing lower medical costs as people put off care and treatment in a recovering economy, but many insurance companies continue to raise their rates. Often, these increases come without any explanation or justification.”

PPACA requires annual reviews of “unreasonable increases in premiums.” Starting in September, insurers will need to justify rate increases over 10 percent–with state by state adjustments to that presumptive number the following year. You can read more about the details here, in the Times.

Insurers’ Profits Swell, Nation Can’t Afford to Get Sick, Can’t Afford to Get Well

Reed Abelson wrote an interesting piece in The New York Times recently– and it is worth considering. Entitled, “Health Insurers Making Record Profits as Many Postpone Care,” the first paragraph speaks volumes:

The nation’s major health insurers are barreling into a third year of record profits, enriched in recent months by a lingering recessionary mind-set among Americans who are postponing or forgoing medical care.

But still there is the push to further increase premiums– with “someday there might be a rainy day” a common refrain/justification among insurers.

I’ll leave alone for now the premium increases amidst what Abelson describes as “flush” reserve coffers and shareholders “rewarded with new dividends.” Res Ipsa Loquitur. But you may want to take a quick look at Reed Abelson’s article.

Having said that, I am taken again by the equation which is said to have filled those coffers: people too broke to get themselves fixed– despite having health insurance. It’s a calculus largely unto itself. In many articles here at HRW we’ve discussed how health insurance is unlike other commodities in the marketplace– averring that the economics of health care itself and that of health care finance may not be reckoned the same as say automobiles or butter and bread.

In this instance we consider health insurance– an asset, or benefit– garnered by an employee in return for work provided to an employer. Presumably, this benefit is received in lieu of an increased rate of pay– cash– that that employee would otherwise receive. The employee may also contribute to paying for the insurance out of his or her wages– once again lessening available cash. And the benefit is not utilized– for lack of cash, or the perceived inability to take time from work in the midst of a recession. But the premium is still, of course, paid.  I generally eat the butter and bread I buy.

With health insurance we pay for an assurance (mutually contracted with risk spread) that in the event we need medical care it will be available. An assurance that we will have the means at our disposal to get well, or at least for someone to try. Though at present, it seems, the economy itself (and the prevalent high co-pay/ deductible structure) has dictated that we are not available to receive the medical care we bargained for– despite it being, ostensibly, available. More years into a recession than I care to count, as a nation we can’t afford to get sick, and can’t afford to get well. For insurers, it’s a perfect storm of the optimal. Having said that, putting aside for the moment the prospect of the catastrophic, the employer/employee/health “benefit” seems somewhat illusory. And yet, unlike butter uneaten we will continue to buy it. That is the nature of insurance– you buy it and hope you don’t need it. Though “need” as of late seems to have been redefined economically. As such, it is a very sunny day for the umbrella salesmen– the umbrellas have been all paid for, but they only hand them out on rainy days. It seems the height of hubris to now seek more money for those umbrellas because someday it might rain– or just business as usual. Apparently the risk spread over time doesn’t include insurers.

Image by Karen Apricot

Obama in Ohio, a Letter from Natoma Canfield

As the Health Care Reform debate winds to a frenzied conclusion, President Obama visited Ohio to reach out in favor of the bill’s passage. I’ll let the President speak for himself, but there’s a letter below this video that you should read. Natoma Canfield sent the letter to President Obama back in December; it epitomizes, I believe, the every day tragedy which is the current state of health care and health care finance. Since then, it’s gotten even worse. Facing the prospect of unaffordable increases in her insurance premiums, Ms. Canfield took, and lost, the gamble that no one wants to take. Unable to pay, she discontinued insurance coverage; she was just recently diagnosed with leukemia.

Why Angela Braly, CEO of the WellPoint Insurance Co., Deserves a Raise

Photo by Ad Meskens

Angela Braly, CEO of  health insurance giant WellPoint, deserves a raise. As regular readers of this column know, Ms. Braly did not make as much as Aetna’s Ronald A. Williams in 2008.

In a post written back in May of 2009 I noted of Insurance Company CEO Total Compensation:

Aetna’s Ronald Williams received $24,300,112 last year. That’s $467,309.85 per week. That’s a house. Maybe not a house that Mr. Williams would live in, but a house nonetheless. The man makes a house a week. And interestingly enough, if Mr. Williams were to eschew the purchase of a house on any given week and instead look to deposit the money in a bank– in order to remain FDIC insured (up to $250,000)– he would actually need to open more than one account–every week. Lest we lament the fate of the other CEOs on the list, in 2008 Ms. Braly had to get by on $189,311.76 per week….

Less than half of what Mr. Williams brought in, in 2008 Ms. Braly was forced to make ends meet on $9,844,212.

In 2007, her first year on the job: $9,094,271. Which, for those keeping score at home, is $174,889.83 per week. Her predecessor at Wellpoint, Larry Glasscock, received  $23,886,169 in total compensation in 2006. Again, in 2008 Ms. Braly had to get by on $189,311.76 per week. True, it was $14,421.93 more per week than she had made the year prior, but that won’t be nearly sufficient for this year.

So why does Angela Braly deserve a raise? Pay so high that the  FDIC limits on insurance (yes, it’s somewhat ironic) won’t work for her weekly paycheck? Because WellPoint subsidiary Anthem Blue Cross of California has found the audacity to raise individual insurance premiums in that state 39%. That’s right, 39%. This, according to Secretary of Health and Human Services Kathleen Sebelius, “as WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.”

Profits “soar,” raise rates. What more could Wall Street want?

Secretary Sebelius has demanded “justification” for the increase. In a letter sent to the Wellpoint subsidiary Anthem Blue Cross, she writes:

One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs.  With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Your company’s strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.

And there you have it, profits soar, raise rates, the stock soars–as will, presumably, Ms. Braly’s stock options. She won’t have “to get by on $189,311.76 per week” for all that much longer. With that kind of move it’s only a matter of time before she finds herself in Mr. Williams’ neighborhood.

Now that the healthcare reform debate awaits its Summit, from the vantage point of its nadir, one might imagine other Insurance Company CEO’s to embark upon a similar strategy. Good thing we jettisoned all those proposed pesky insurance regulations contained in the House & Senate bills.

Because it never gets old to me, here’s the list of Insurance Company CEO Total Compensation:

Res Ipsa Loquitur.

Ins. Co. & CEO With 2007 Total CEO Compensation

• Aetna Ronald A. Williams: $23,045,834
• Cigna H. Edward Hanway: $25,839,777
• Coventry Dale B. Wolf : $14,869,823
• Health Net Jay M. Gellert: $3,686,230
• Humana Michael McCallister: $10,312,557
• U.Health Grp Stephen J. Hemsley: $13,164,529
• WellPoint Angela Braly (2007): $9,094,271
  L. Glasscock (2006): $23,886,169

Ins. Co. & CEO With 2008 Total CEO Compensation

• Aetna, Ronald A. Williams: $24,300,112
• Cigna, H. Edward Hanway: $12,236,740
• Coventry, Dale Wolf: $9,047,469
• Health Net, Jay Gellert: $4,425,355
• Humana, Michael McCallister: $4,764,309
• U. Health Group, Stephen J. Hemsley: $3,241,042
• Wellpoint, Angela Braly: $9,844,212

See Nonprofit Health Related CEO Compensation Here.

“Who’s Looking At the Compensation of the Health Care Insurance Executives?” and “Where’s H.R. 676?”

photo by alusiaaa via Flickr

Interesting comments from Kevin T. and Jeremiah regarding Conrad Dillon’s post the other day, “Obama to Unveil Plan for Health Care Reform.” Jeremiah is a proponent of John Conyers “single payer plan,” The United States National Health Insurance Act, H.R. 676 (you can also see the plan in the sidebar of this blog under “Health Reform Plans” and an excellent summary at Healthcare-NOW.org ).

We wrote about H.R. 676 back in December, in a post titled, “Medicare for All?” We noted then that “the plan seems to have received little mention in the media,” though it has a number of supporters–including, at the time, 94 co-sponsors, and “most labor unions, thousands of doctors, nurses and health care professionals.”

The Conyers proposal, also backed by the Physicians for a National Plan, would gradually provide Medicare for everyone who wants it and would pay a premium; it is sometimes referred to as “The Medicare for All plan.”

As Saul Friedman, columnist for Newsday, explained, the Medicare for All plan

“would absorb such programs as Medicaid, SCHIP and be paid for by taxes and premiums. It could relieve auto manufacturers and other businesses of paying for health insurance for employees and retirees. Its sponsors say it would save $300 billion a year in administrative costs, for it would deny insurance companies a role.”

And that may be the rub.

Friedman states:

“Getting over that hurdle may be why HR 676 has gotten so little publicity, even from alleged friends of older people. There is no mention of it on the Web site of AARP, which earns $700 million a year in royalties on the sale of private health insurance it sponsors.”

In an Op-Ed piece in the Atlanta Journal Constitution, Dr. Oliver Fein, associate dean and professor of clinical medicine and public health at Weill Cornell Medical College in New York and president of Physicians for a National Health Program wrote that

“As long as we rely on private health insurers, universal coverage will be unaffordable…. There is a cure, however. Eliminating the private insurance industry would save $400 billion annually in administrative costs, enough to ensure that everyone is covered and to eliminate all co-pays and deductibles.”

Perhaps understandably, there has not been a great deal of support voiced for the Conyers plan (or for Dr. Fein) by the Insurance Industry. The common adage concerning health care reform at present has been that “if you’re not at the table, you’re on the menu.” By all accounts, private insurers have taken a seat at the table–and the “menu” they’re protecting there would seem to readily qualify as sumptuous.

Kevin T. was kind enough to forward to us these figures concerning CEO compensation for major medical insurers. The figures for Insurance Co. profits (2007, Aetna: 1.831 Billion profit) as well as the CEO compensation figures can be found  here, courtesy of the very interesting Insurance Company Rules.org- a project of Health Care for America Now.org. The numbers were culled from the companies’ SEC filings (Schedule 14A) and are well worth a look. But I’ll list a few of the figures here as well:

Ins. Co. & CEO With 2007 Total CEO Compensation

• Aetna Ronald A. Williams: $23,045,834
• Cigna H. Edward Hanway: $25,839,777
• Coventry Dale B. Wolf : $14,869,823
• Health Net Jay M. Gellert: $3,686,230
• Humana Michael McCallister: $10,312,557
• U.Health Grp Stephen J. Hemsley: $13,164,529
• WellPoint Angela Braly (2007): $9,094,271
  L. Glasscock (2006): $23,886,169