Third-Quarter Profits Reach $3.4 Billion as Health Insurers Cut Spending on Care, Drop Unprofitable Members Insurance Companies Force Consumers to Pay Bigger Share of Health Bills; Republicans Aim to Kill Consumer Protections by Repealing New Law Published on Nov 16, 2010 - 7:01:48 AM
WASHINGTON, D.C. Nov. 16, 2010 - The six largest investor-owned health insurance companies recorded huge profit gains in the third quarter of 2010 by spending a smaller share of premiums on medical care, purging unprofitable members and burdening consumers with higher cost-sharing limits. WellPoint Inc., UnitedHealth Group Inc., Aetna Inc., Humana Inc., Cigna Corp. and Coventry Health Care Inc. made combined profits of $3.4 billion in the three months ending Sept. 30, a 22% increase over the third quarter of 2009, according to an analysis of company filings by Health Care for America Now (HCAN).
"The insurance companies are jacking up rates and selling lousy coverage without regard to the devastating impact on real people's financial security and their health," said HCAN Executive Director Ethan Rome. "Their behavior is offensive, and it's outrageous that the Republicans in Congress want to give control of our health care back to the insurance companies by repealing the Affordable Care Act. We need the law and the protections it provides."
One reason premiums and profits continue rising is that insurers keep reducing the percentage of premiums they spend on actual health care, a measurement known as the medical-loss ratio, or MLR, by denying people care. Coventry cut its MLR for employer and individual health plans by an unheard-of 5.3 percentage points to 76.8%. That increased Coventry's third-quarter profit by 169% from a year earlier. Aetna's MLR plunged 5.1 percentage points to 80.5%, and its third-quarter profit surged 53%. Other companies also reported double-digit profit growth and major reductions in MLRs, consistent with long–term industry trends. In 1993, the leading health insurers used about 95 cents of every premium dollar on actual health care. By 2007, after years of mergers and acquisitions that put much of the U.S. population under the control of a handful of for-profit companies, investor-owned health insurers had jacked up premiums and lowered the medical-loss ratio to around 81%.
"The financial engineers running the insurance companies know they make money by denying care, and they makemore money by denying more care," said Rome. "That's why the tough protections and increased competition and choice in the new law are so important. The law ends the total stranglehold that these companies have on our health care."
New minimum MLRs are set to take effect next year under the new law. The landmark health care legislation requires insurance companies to spend up to 85% of premiums on medical services instead of profits and executive pay. Insurers also must publicly defend their premium hikes. The law will guarantee health security for all Americans and end the worst insurance company abuses, such as pre-existing condition exclusions.
"The health insurance companies continue to blame skyrocketing insurance premiums on rising medical costs when they know that's simply not true," said Rome. Rate hikes have for years greatly surpassed the growth of medical costs, wages and overall inflation. According to HCAN, they are the result of excessive profits, money-driven customer abuses and extravagant executive compensation.
As insurers set more earnings records, more financially stressed health plan members have chosen less expensive catastrophic coverage with high deductibles and co-payments. This flimsy coverage has caused a growing number of people with health insurance to avoid their doctors, leave prescriptions unfilled and skip diagnostic tests recommended by physicians.
With premiums out of control and the economy weak, the number of Americans without health coverage soared as high as 59 million last year. From Dec. 31, 2008, to Sept. 30, 2010, the combined commercial enrollment of the six companies fell by a staggering 3.4 million, according to the HCAN analysis. Many people who lose coverage remain uninsured or apply for federal–state Medicaid benefits.
"The health care law for the first time will put a check on the out-of-control behavior of the insurancecompanies," Rome said. "Repealing this law is the most anti-consumer thing the Congress can do, and it's the only health care idea the Republicans appear to have."
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