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Top Five Health Insurers Posted 56
Percent Profit Gains in 2009
By John Byrne, Raw Story
Posted on
February 12, 2010, Printed on February 13,
2010
http://www.alternet.org/story/145655/
If no health care overhaul passes Congress, health insurers may be in
for a windfall -- and one far larger that most Americans probably
realize.
According to a study by a pro-health reform group published Thursday,
the nation's largest five health insurance companies posted a 56 percent
gain in 2009 profits over 2008. The insurers including Wellpoint,
UnitedHealth, Cigna, Aetna and Humana, which cover the majority of
Americans with insurance.
The insurers' hefty profit gains came even as 2.7 million more
Americans lost their insurance coverage due to the declining economy.
A lobbyist for American's Health Insurance Plans, the trade group that
represents insurers in Washington, D.C., attributed the gain in 2009
profits to a poor performance in 2008. In 2008, insurers were forced to
write down their stock holdings because of the U.S. market's declines.
Insurance companies keep a great deal of money in the markets, earning
interest from the time between premiums are paid and the time when health
providers are paid.
"It is disingenuous to look at the profits at one company today
compared to where it was in the depth of a recession," Robert Zirkelbach,
a spokesman for America's Health Insurance Plans, told the Cleveland
Plain Dealer.
The insurer profit study was prepared by the liberal-leaning group
Healthcare for America Now, an organization bankrolled by labor unions,
which typically take strong positions in favor of Democratic policies,
while historically being highly critical of Republicans.
"Insurers will -- perversely -- try and blame the economy for their
record-breaking fortunes, saying employers have been shedding jobs and
therefor dropping insurance coverage, leading to a decrease in customers,"
a press release for Health Care for America Now said. "And they're
certainly right in the sense that less jobs equals less employer-based
health coverage, but that obscures the fact that employers have been
steadily dropping health coverage for more employees for 15 years -- even
during good times -- because the insurance industry's prices keep
skyrocketing much faster than inflation."
"None of the excuses can explain away the basic reality that insurers
make more money when they insure less people. They can pay their CEOs more
('administrative costs' rose this year) when they can charge the healthy
exorbitant prices and drop or deny these loyal customers when they become
sick and therefore expensive," the release added.
Notably, the study also found that insurers spent less money on medical
care as a percentage of their premiums from customers. Salaries,
administrative expenses and profits made up more of the insurer's expenses
in 2009.
Wellpoint's Anthem Blue Cross California created a stir earlier this
week by announcing that it will raise premiums on individuals by 39
percent in 2010. The increase was so high it drew a rebuke from the Obama
administration. Wellpoint defended the increase, saying the decline in
customers had increased the percentage of sick patients under its care,
thus warranting a higher charge to consumers. Wellpoint also pointed out
that its California division actually lost money in 2009.
Yet, the company posted a profit of $4.7 billion for the year. That put
it at a higher profit margin (7.3 percent) than any of the other top five
American insurers.
Wellpoint's CEO also recently said the company is considering
paying a dividend to its investors -- a sign of its profitability --
which might further rankle insurance company critics.
Insurance companies typically average a profit margin closer to four
percent, with about 80-85 percent of premiums spent on reimbursing
patients' medical expenses. The remainer goes to administrative costs,
salaries and marketing. Under a bill under consideration in the Senate,
medical "loss benefit ratios" would be set at 80-85 percent, meaning
insurers would face little pressure to trim administrative costs relative
to medical care.
Other highly profitable insurers in 2009 included Humana, which saw a
profit yield of 7.1 percent.
Despite record 2009 profits, insurers are under increasing pressure to
deliver gains for investors, as the pool of insured Americans continues to
fall. Insurance companies that make much of their money from businesses'
healthcare plans have seen declining rolls amid an economy roiled by a
nearly 10 percent unemployment rate.
Some analysts have also said that the failure of the health insurance
reform package could damage insurance companies in the long run, because
subsidies from the federal government would have likely insured 30 million
new customers.
Health Care for America Now's study also highlighted the following
statistics:
* The five largest insurance firms firms made $12.2 billion, an
increase of $4.4 billion, or 56 percent, from 2008.
* Four out of the
five companies saw earnings increases, with CIGNA’s profits jumping 346
percent.
* The companies provided private insurance coverage to 2.7
million fewer people than the year before.
* Four out of the five
companies insured fewer people through private coverage. UnitedHealth
alone insured 1.7 million fewer people through employer-based or
individual coverage.
* All but one of the five companies increased the
number of people they covered through public insurance programs (Medicaid,
CHIP and Medicare). UnitedHealth added 680,000 people in public
plans.
* The proportion of premium dollars spent on health care
expenses went down for three of the five firms, with higher proportions
going to administrative expenses and profits.
John Byrne is editor of Raw
Story.
© 2010 Raw Story All rights
reserved.
View this story online at:
http://www.alternet.org/story/145655/ |