‘Insuring’ Healthy Profits

Posted July 29, 2009, at 5:39 p.m.

As the debate continues on comprehensive health care finance reform, a closer look at health insurance companies — and their ballooning profits — is in order. Health insurers stand to be the biggest “losers” in a reform that includes a public insurance option, which would compete for consumers. Do those companies have a legitimate gripe? Are their interests enough reason to slow or stall the Obama administration’s efforts to rebuild the system?

From 2000 to 2007, profits at the country’s 10 largest publicly traded health insurance companies rose 428 percent, according to a report by the advocacy group Health Care for America Now! The report relied on filings with the Securities and Exchange Commission. Health insurance profits during that period grew from $2.4 billion to $12.9 billion annually, according to HCAN. And those companies were generous with their top brass. “In 2007 alone,” according to the report, “the chief executive officers at these companies collected combined total compensation of $118 million — an aver-age of $11.9 million each.”

One of the reasons health insurance is such a lucrative business is the limited competition in the market. “In the past 13 years more than 400 corporate mergers have involved health insurers,” the report says, “and a small number of companies now dominate local markets.” Though these companies argue the mergers have led to efficiencies, HCAN asserts that numbers suggest the contrary. “Premiums have skyrocketed, increasing more than 87 percent, on average, over the past six years,” according to the report.

HCAN cites a 2007 speech by then-Sen. Barack Obama, in which he said “lax [antitrust] enforcement” was hurting consumers.

Especially hard hit are low-population states such as Maine. In the Pine Tree State, and in Hawaii, Rhode Island, Alaska, Vermont, Alabama, Montana, Wyoming, Arkansas and Iowa, “the two largest health insurers control at least 80 percent of the statewide market,” according to HCAN. “In Ban-gor, Maine, the biggest insurer controls 74 percent of the market,” the report notes.

Whenever a major policy shift is proposed, rather than applying an ideological test, which leads to hyperbolic cries about socialism, voters should consider instead who wins and who loses. In most of the health care reform scenarios being considered, the biggest losers are health insurance compa-nies. The burden placed on taxpayers should also be legitimately considered, but to date, the Obama administration is maintaining that only high-income households — over $250,000 in annual earnings — would “lose” and be hit with higher taxes. The federal budget is another potential loser, and Congress and the president must work to ensure that any plan minimizes the impact on deficits.

But if health insurance company earnings are squeezed to, say, increases of 100 percent over the next seven years instead of 428 percent, isn’t that a loss the nation’s economy can accept? And the winners, of course, will be consumers and most businesses and the nation’s economy, which will no longer see $1 in six siphoned off to health care.

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