WASHINGTON, D.C. Aug. 11, 2010 - Health Care for America Now (HCAN), the 1,000-member coalition that led the successful fight for health reform, released a report today showing that in 2009, while America's families struggled with skyrocketing health insurance costs and the worst economy since the Great Depression, chief executives of the 10 largest for-profit health insurance companies collected total pay of $228.1 million, up from $85.5 million the year before. The CEOs of UnitedHealth Group, WellPoint, Aetna, CIGNA, Humana, Coventry Health Care, Health Net, Amerigroup, Centene and Universal American took $944.1 million in compensation from 2000 through 2009, according to the report, entitled "Breaking the Bank."
The jaw-dropping compensation for 2009 set new standards for the industry and for what CEOs will pay themselves in the future. Last year's compensation for health-insurance CEOs was enormous, enough to fund stress tests to check the heart health of up to 776,000 patients, or to pay for every resident of Philadelphia, Dallas and Minneapolis combined (3.2 million people) to go to their regular doctor for an office visit. Over the full decade covered in the report, average CEO pay has reached nearly $10 million a year per company.
"The insurance companies are driven by perverse incentives that reward CEOs for imposing devastating rate hikes on families and businesses while denying care to people when they need it most," said HCAN Executive Director Ethan Rome. "It's indefensible that CEOs in America are profiting by gouging customers in such a shameless way."
Among the HCAN report's findings:
* CIGNA CEO Edward Hanway, who retired in December 2009, got the usual excessive pay and stock options that year but also gave himself a $111 million pension package as a going-away gift. Combined with pay received by his successor, David Cordani, the company parted with $136 million in CEO compensation in 2009. That is enough money to pay for 204,000 infants to receive the recommended series of seven well-baby visits in their first year.
* CEO Stephen Hemsley of UnitedHealth Group banked $107.5 million in 2009, including $98.6 million from exercising stock options. Hemsley's total take would pay for up to 1.1 million women to receive mammograms.
* CEO Ron Williams of Aetna Inc. collected $18.1 million in total compensation last year, enough to enough to pay for 4,853 people to undergo arthroscopic knee surgery.
* CEO Angela Braly of Wellpoint Inc. got a 51 percent raise to $13.1 million in 2009. That amount would cover the cost of 2,500 hernia operations.
"It's unconscionable that insurance companies are jacking up premiums and giving their CEOs multi-million dollar pay packages when families are struggling to make ends meet and businesses are barely keeping their doors open," Rome said. "We need to be creating jobs for America, not creating wealth for a handful of CEOs."
Each year, health insurance companies charge their customers higher premiums and provide more restrictive coverage. Insurers blame the hikes on rising costs charged by health care providers, but the facts say otherwise. Meanwhile, health insurers set new profit records (the five largest for-profit health insurers reported net earnings of $12.2 billion in 2009) while compensating their top executives with exorbitant salaries and stock options.
In January and February, WellPoint's Anthem Blue Cross subsidiary in California notified customers in the individual market that 2010 rates would rise by as much as 39 percent because of the weak economy and the soaring cost of medical care. Yesterday, the Los Angeles Times cast doubt on those explanations with a report on Anthem President Leslie Margolin's opposition to the politically explosive rate hikes. She urged WellPoint not to pursue them. Margolin also "privately pressed WellPoint to abandon the company's get-tough approach to longtime adversaries-doctors and hospitals-and instead collaborate as part of a new ‘healthcare transformation strategy' to cut costs and improve patient safety and the quality of care," the Times reported. WellPoint CEO Braly and her staff rejected her recommendations last month Braly ordered security guards to escort Margolin out of the Anthem offices. WellPoint recorded profit of $4.75 billion in 2009.
Insurers Mount Lobbying Assault on New Health Reform Rules Before They Take Effect:
State and federal insurance regulators are currently considering guidelines to induce health plans to spend a greater share of their premium revenue on patient care and less on executive compensation, administration and profit. The proposal revolves around a closely-watched financial indicator known to Wall Street investors as the medical-loss ratio (MLR). The new health reform law includes a provision that requires insurers to spend on patient care at least 80 percent of health plan premiums collected from individuals and small employers and 85 percent of premiums paid by large employers.
Crucial recommendations on implementation of these guidelines will be made soon to the U.S. Health and Human Services Department by the National Association of Insurance Commissioners. Most of the plans reviewed in the HCAN report continued in the second quarter of 2010 to spend lavishly on non-medical activities while reducing the share of premium dollars used for members' actual health care.
The health insurance industry wants to expand the definition of allowable medical expenses to include costs that are not directly related to the delivery of care and have not historically been classified as medical. Instead of reducing costs and improving the efficiency of their operations, they simply want to change how certain expenses are classified. This approach would encourage CEOs to gouge consumers even more than they already do in order to jack up corporate profits and share prices, thereby increasing bonuses and grants of stock and stock options to them. That would augment the value of their personal holdings as the share of premium dollars spent on medical care continued to shrink. They can do this because they have little competition in 99 percent of metropolitan areas. Limited competition means insurers lack the incentive to drive down costs, while the absence of transparency about their behavior drives costs up.
"The insurance companies and their army of lobbyists are doing everything they can to undermine this law," said Rome. "In order to feed their greed, they are pressuring regulators to change the very definition of what is ‘medical care' so they can ignore these important new requirements and trump Congress."
In addition to stifling the impact of the historic health reform law, health insurance companies want to craft as many exceptions, transitions, and delays as possible to avoid meeting even the weakened standards they seek.
Strong standards for insurance company spending are needed to ensure that premiums are not jacked up merely to perpetuate bloated executive compensation. The MLR standards in the Affordable Care Act are critical to curbing the worst of the health insurance industry's consumer abuses, controlling rising premium costs, increasing the value of premiums paid by private and public customers, and reining in the profiteering of health insurance companies.
To enforce the MLR standards and fulfill the promise of quality, affordable health care for all, the U.S. Department of Health and Human Services must reject the insurance industry's sophisticated efforts to undercut the law. If the rules governing medical-loss ratios, rate review and other consumer protections are implemented as intended, the health reform law will hold accountable an industry that abuses millions of customers when they need health benefits the most.
Health Care for America Now is a national grassroots coalition of more than 1,000 organizations in 46 states representing 30 million people. HCAN spent $51 million over the past two years in the fight to win passage of health reform and to keep Congress from being steamrolled by corporate special interests.
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