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Feb 22, 2010, Washington, D.C., United States – Companies that provide health insurance for Americans are wallowing around in $12.2 billion of 2009 profits. That’s a 56% increase in profits from just 12 months ago as reported by Health Care for America Now, a liberal coalition of labor unions and advocacy groups. And while the average American worker struggles daily with the possibility of the incurred financial costs associated with even a minor illness or injury, the costs of effective health insurance continues to skyrocket.
Andrew Kurz, former chef financial officer of Blue Cross/Blue Shield of Wisconsin stated recently, “Insurance company profit margins put the industry in the top 10% of all industries, up there with cigarette manufacturers. Insurers price their products like a discretionary luxury, not something essential for health and well-being.” The 2009 profits margins were record-setting and the 5 largest health insurance providers lucratively floated through the heaviest bout of economic downturn that has been experienced in America since the Great Depression.
How health care companies made record profits in 2009:
- They were no longer responsible for the 2.7 million Americans that were left behind from discontinued private health care plans;
- For others who retained their benefits, rates were raised, costs were shared and the percentage of premiums made available to cover medical costs was lessened;
- Dropping the coverage of the sickliest policy holders;
Of course, there is a certain degree of public outrage associated with the highest-ever health insurance company profits margins. In fact, Congress is even on the case. Angela Braly, CEO of WellPoint, has been commanded to appear at a congressional hearing this coming Wednesday. She will be multi-directionally grilled about any and all of the following and more:
- How WellPoint justifies preplanned health insurance rate hikes of up to 39% for some customers, especially considering that the company was already generation billions in profits last year;
- How WellPoint justifies the $2.2 billion it received from the sale of a pharmaceutical benefits management company;
- Exactly how did WellPoint generate $4.7 billion in 2009 profits;
What WellPoint’s defense is:
- 58% of the company’s earnings was generated from employer-sponsored health coverage programs;
- Only 10% of profits are generated from individual health insurance policies;
- The actuarial department simply overestimated the total costs of projected 2009 payouts;
- Hospital associated costs are continuing to raise by at least 10% annually;
- Costs of pharmaceuticals have risen 13% in the last year;
American health care reform:
With President Obama’s bipartisan health care summit scheduled for this Thursday, the acceptable level of rates hikes and profits margins for health insurance companies will certainly need to be addressed. Insurance companies are ‘for-profit’ organizations and do not apologize for being so. Dan Mendelson, President of Avalere Health, states, “While insurers do aim to make money, analysts and actuaries say rising medical costs are the main driver of rate hikes. Many insurers are in competitive markets, and they have to be careful not to overprice. You wouldn’t see a 35 percent increase in price because they’re trying to make more profit,” he concluded. “It just doesn’t work that way.”