When an insurance company says an 11 percent increase in its rates — during a recession — is too small, it is clear that the health care system has lost its way. Health care must be about patients and medical treatment, not corporate profits. Until the country and especially Congress, which is currently writing and debating health care overhaul legislation, returns to this notion any reform will be more akin to window dressing than the fundamental change that is needed.
In August, Anthem Blue Cross and Blue Shield of Maine appealed a decision by the superintendent of insurance denying the company’s request for an 18.5 percent increase in its rates for individual policyholders, who represent about 12,000 of the company’s 400,000 customers in Maine. In May, state Insurance Superintendent Mila Kofman approved an 11 percent increase. In its filing, the company said the higher increase was needed to support a 3 percent profit. It also said the higher rate was necessary because the number of people in the individual market is shrinking, leaving a pool of less healthy individuals with higher medical costs.
In a response to the appeal, the Attorney General’s Office rightly noted that the company could make a profit by cutting its own costs. Anthem, of course, should be able to earn a profit. But as other industries have learned, especially in recent years, there are ways to do this other than simply raising prices.
Further, profits across all the company’s product lines have been plenty healthy. Those profits have fluctuated from 5 percent to 9 percent since 2004, according to the Attorney General’s Office. From 2006 to 2008, Anthem’s Maine operation paid nearly $152 million in dividends to WellPoint, its parent company, according to the same document.
Anthem isn’t solely to blame for this relentless focus on profit. Wall Street puts enormous pressure on insurance companies to earn as much money as possible, says Wendell Potter, a former communications director with CIGNA who now is calling for insurance reform with a public option.
A number that Wall Street analysts keep a keen eye on is what is called the medical loss ratio. It is the portion of every dollar that is spent on claims. The lower the better, according to Wall Street, which seeks to maximize earnings for investors.
In 1993, medical loss ratios averaged 95 percent. Today, they are 80 percent, Mr. Potter said during a stop in Maine. The 15 cents difference now goes to things like marketing, executive salaries and profit. To keep the ratio low, insurance companies constantly look for ways to deny claims and to get customers to pay more for less.
The only way to counter this pressure from Wall Street is through a public option, according to Mr. Potter. A public option is the only way to provide the competition necessary to break the cycle of escalating premiums caused by the relentless drive for profits.
If the legislation from Capitol Hill doesn’t address these problems, it isn’t reform.