The Truth About Health Insurance. It’s Not What You’ve Heard. RESIST!

warningWarning! This blog is necessarily long but even so we have only covered the proverbial “tip of the iceberg.”

What you are about to read is out of the mainstream. Neither the government nor the health insurance industry wants you to have any of this information. They believe that an uninformed citizenry will allow them to keep things just as they are. The health insurance industry wants free reign to continue to overcharge you and they get significant support from elected officials who have taken their campaign contributions. They both have an interest in reducing your wealth.   

I offer the information contained here as an aid for you when you attend town hall meetings or any function in which elected officials or insurance company representatives are present. It should help you ask more intelligent, pointed questions and be able to follow up on them. We suggest you cut and paste this information to a file you can immediately access. No permission is necessary.

The cost of healthcare insurance grows daily. Premiums are rising, co-paysnew health care plan are increasing and coverage is diminishing.  Why is that? President Trump will tell you Obamacare is the reason, so will Paul Ryan. The Democrats will tell you it’s because of the Republican unrelenting seven year attack on the Affordable Care Act which has undermined public confidence. Neither answer is complete or accurate. Both sides seem to go out of their way to ignore the real villains – the health insurance industry. The soaring rhetoric of politicians is meaningless without any effort to do something about this travesty.

There are many reasons for the outrageously high premiums you pay for health insurance. The five reasons that follow are most responsible.

  1. The cost of keeping up with state of the art technology. It’s a moving target because it changes so rapidly and the competitive nature of hospitals and clinics causes them to always want to have the latest hi tech diagnostic equipment and other devices. They justify the purchases as necessary in order to be able to compete. Despite the cost, though, this significant element is still not a major force in driving up the cost of health insurance.

4. Physician/medical team compensation. Yes, they are well-paid and yes, it amounts to a lot of money, but like number 5 this element while significant, is not a major contributor to the ever increasing cost of your insurance premiums.

3. Medication and medical devices. Out of control profits for big pharma. Their effect, which is beyond significant, has its greatest impact on the overall cost of healthcare, not just insurance premiums. The growth of prescription drug prices is totally out of control. Big pharma cites reasons like the cost of research and development but that’s a smokescreen. They spend more on advertising and promotion than they do on R and D.

greed 2.jpgIt is in the area of prescription drugs, though, where the word GREED makes its first appearance. This category is so important and so far out of control it deserves and will get a blog all by itself. Still, while big pharma has a bigger effect on the cost of health insurance than the preceding issues it doesn’t come close to the next two. But it would be foolhardy to ignore it. Every dollar saved is a dollar less out of your pocket.

Following are the two major reasons your health insurance premiums are not only high, but continue to increase with no end in sight. One word and one word alone describes both of them – GREED!  Neither of these two topics receives much attention from politicians and that’s because they are two exceptionally hot potatoes.

  1. Health insurance industry profitability. This is big, very big. Profits are record setting to the point of being absurd. These companies are sucking billions and billions of dollars out of healthcare coverage to pay big dividends to investors and cause the individual company bottom lines to swell like a bee sting on your butt.

1.Insurance company executive compensation. This is the gator in the barnyard. You pay outrageously high premiums to make sure the ultra-rich, become ultra-richer. Some of these CEOs make more money in a few months than many of you, of us will make in an entire lifetime. For example, we calculate that a typical CEO from the top dozen health insurance companies is compensated at the rate of about $15-20,000,000 a year. There’s no question that they work hard, but are they worth  $5,555.00 per hour. To really drive the point home, that’s a weekly paycheck of $389,000.00.

The Trump administration and the surrogates who speak for it continually pound us with messages about how Obamacare is failing and will implode. They remind us of all the insurance companies who are pulling out of the market. They fail to mention that none of those companies are pulling out because they are “losing money.” They aren’t losing anything. Their chief complaint is that they are not making “enough” money. “Enough” is the key word.

Still another reason for pulling out is pressure from the GOP. They keep telling the insurers that they are going to repeal Obamacare and replace it. Hearing that message many of the uninsured are reluctant to sign up and some of those already insured don’t know what to do. With that big push by the Trump/Ryan forces it is quite natural that health insurance companies start withdrawing in anticipation of the next big windfall. While Obamacare did little to control the outrageously high profits of the health insurance industry, Trumpcare will do even less. If anything they are ensuring that corporate profits and executive compensation will soar to even greater heights because of their reverse Robin Hood approach.

The bill passed by the House takes from the poor and gives to the rich.repeal and replace.jpg That’s not an empty claim. According to the Atlantic agazine  In light of the House GOP releasing their bill to repeal and replace the Affordable Care Act (ACA or “Obamacare”), the Joint Committee on Taxation (JCT) released their estimates of the costs of repealing the ACA’s taxes. JCT estimates repealing the ACA’s taxes alone will cost nearly $600 billion through 2026 – and likely close to $700 billion through 2027.

The taxes being repealed are those that were levied on the wealthy with the introduction of Obamacare. Repealing them just means the wealthy got a huge tax cut.

That’s not all. Many companies can deduct employee salaries as a business expense when they pay taxes. Obamacare included a provision that prevented insurance companies from deducting more than $500,000 of their top executives’ salaries, as a way of raising a little bit of revenue and discouraging ever-rising compensation for insurance executives. But the Republican replacement law scraps that provision, so that large insurance companies like Cigna and Aetna, which pay their CEOs more than $15 million, would find new tax savings.

UnitedHealth, the nation’s largest health insurer says it is leaving the marketplace. United claims Obamacare has reduced its 2016 earnings by $850 million. To the uninitiated that sounds unconscionable, “Damn Feds.”  Well, let’s set the record straight. While their earnings were down that much (they weren’t lying) that does not mean they were not profitable. You see, the average person doesn’t understand all that psycho-babble about net and gross earnings, or even the words net and gross. They also don’t understand ROI (return on investment) pre-tax profits, revenue, stock options and all the rest and the insurance companies like that. They use their business knowledge advantage to snow us with terms no one understands. Believe me, United Health’s profits are alive and well and soaring folks. In 2015 they had record profits and 2016 was even better.

30 billion.jpgA Salon analysis of regulatory filings found that the top five health insurers — UnitedHealth, Anthem, Aetna, Humana and Cigna — have doled out nearly $30 billion in stock buybacks and dividends from 2013 to 2015.That’s $30 billion dollars that did not go to lowering your premiums. $30 billion that has absolutely no beneficial impact on your insurance or your health. It is $30 billion skimmed from your premiums to make sure that the people who manage your health insurance live a hell of a lot better than you do on your money.

All over America hard working families are struggling to make ends meet, wondering where they’ll get the money to pay their health insurance premiums, going without some necessities in order to insure their families while a bunch of multi-millionaires and billionaires eat at the best restaurants, stay at the best hotels and send their kids to the best schools – and it’s all on your tab. It is nothing more than high-tech, legalized extortion. Not a single dime of those billions of dollars goes to help any of the millions of Americans who struggle to pay the ever increasing premium payments.

Complaints about the cost of healthcare are not new. Since long before the Affordable Care Act passed in 2010 people have been shocked each year with their premium increases. The ACA did little to address that. It focused primarily on making health insurance accessible and affordable to those who needed it. The word affordable, is really meaningless because few Americans under any plan can really afford what they pay for health insurance with the exception of wealthier citizens.

This year the Trump administration made an attempt to replace the ACA with their own version of healthcare for Americans. It offered access to insurance for everyone but at a cost few could afford. Access, then, is a trick word, one meant to give comfort but which is in fact a booby trap. Access is meaningless. The GOP bill may as well have offered everyone access to a Rolls Royce. Few could afford it but everyone would have access. Neither of the two acts, though, addressed the real problem, “Why does health insurance cost so much?”

The major culprits no matter how you cut it — is exactly what I outlined earlier. The villains are the people who are selling health insurance. And…while the government is in a position to regulate these temples of greed, they’ve done little or nothing. The reason? Intense lobbying by the health insurance industry. It is another example of how part of the premium you pay is used to defeat measures that would help you. You are paying for the insurance industry’s effort to make you pay more. How’s that for a non sequitur?

I’m not going to go into detail on lobbying efforts here because that, too, deserves its own blog.  I will only say this; the five largest publicly traded insurers spent a combined $6.2 million in the first three months of 2017 – the first three months!  And – the great majority of that amount was spent on lobbying in Washington as the congress debated Trumpcare.  And — the money they spent they got from the premiums you paid.

Among other things, they encouraged lawmakers to preserve the ACA’s (Obamacare) individual mandate and cost-sharing subsides if they repealed the healthcare law. They made that sound like a benefit to policy holders but it is Orwellian double-speak. Their effort was extremely self-serving because the subsidies provided by the government don’t go to you, they are paid to the health insurance companies.

While they were lobbying hard to save the subsidies, they spared no energy in their successful effort to repeal the loathed annual tax on health insurance companies. That tax is used to fund the ACA subsidies for low-income enrollees. God forbid health insurance companies should be taxed. Now it’s up to the U.S. Senate.

There are about a dozen prominent health insurance companies in America and you know the names, Humana, United, Aetna, Blue Cross/Blue Shield, Anthem, Cigna and a few others (The Blues are non-profit corporations. they can’t use the word profit so they use the term, “Excess Revenue.” Non-profit companies don’t have shareholders so they are required to use the money to improve the model and to compensate executives who work for them. Their executives, though, are handsomely rewarded).

The for-profit companies expect to get a healthy return on investment. What they get, though, is more than healthy.  Know this, your health is not a priority for the health insurance industry. Their reason for existing has nothing to do with your health and they don’t even try to hide it. They openly admit that their top priority is to be as profitable as possible. The formula for that end is simple, “Keep premiums high and provide as little as possible in the way of service to policy holders.”

As far back as 2003 Humana CEO Michael McCallister said, “It is obscene profits.jpgimportant to note if we have to choose between achieving our membership goals and achieving profitability goals, profits will win every time,” The following year, he reiterated the company’s priorities in an interview with the Associated Press: “We will not play the market share game and will continue to price our business for bottom line profitability.”

Besides being a blogger I’m also a former business owner. I’m not opposed to profitability. You can’t survive without healthy profits. My former employees can attest to my frequent urging to keep that in mind. But — there’s a big difference between a healthy profit and gouging your customers. Nowhere is that gouging better reflected than in the enormous profits piled up by these companies and the compensation paid to their executives.

Last year, Humana raked in $29 billion in revenue and $833 million in profits. It ranked 98th on Fortune magazine’s listing of the nation’s largest corporations.

Also last year, Humana paid McCallister $2.39 million. Forhes Magazine says that over the past five years, his compensation totaled $56.9 million. He also owns more than $60 million in Humana stock options.

McCallister lives in a home that borders on a very pricy country club. The home is valued at $1.1 million. He also has another home in Park City Utah that the county assessor valued at $6.9 million. Unfortunately, McCallister is the rule, not the exception.

Ever hear of Mark Bertolini? Probably not. He stays out of the news and just quietly enjoys his fortune. Bertolini is the CEO at Aetna. The SEC (Securities and Exchange Commission) tells us that his 2015 compensation was $27.9 million. As to the company? Well, Aetna posted operating revenue of over $60 billion that year which was an all-time record for the company. When profits are that high, when executives are paid that much, there’s some serious gouging going on.

Because of corporate and CEO greed, people like McCallister and his CEO colleagues continue to complain that the ACA just doesn’t allow them to make enough money. But it is not ACA doing that, it is their GREED! As they raise premiums more and more people find that they can’t afford the coverage which results in fewer insured people and therefore a smaller risk pool, which means rates have to go up again. The reduction in the number of people carrying health insurance is the fault of the insurance companies…not ACA.

risk pool“Risk pool.” What is that? Well, that’s insurance lingo for how they determine what to charge. Here’s how it works. Let’s say 1000 people sign up for health insurance. That’s the risk pool. Most or many of them will never use the insurance because they are healthy so they are paying some of the cost for those who are not so healthy and use insurance more often. As the risk pool grows premium increases can be controlled, but if you price yourself too high people can’t afford to buy insurance and therefore the risk pool shrinks and as it does, prices for everyone increase.

One of the reasons that health insurance companies are complaining is that before ACA they could tell you that a preexisting condition made you uninsurable for that disease. In other words if you had diabetes, they would insure you for everything but diabetes. ACA said, “You can’t do that, you have to insure everyone regardless of preexisting conditions, so the premiums were higher but remember, premiums never went up because insurers were losing money. They went up because profits weren’t high enough and the increases were arbitrary..

The mandate under Obamacare that required people to be insured or be penalized helped to ensure the size of the risk pool, but premiums became so expensive many of those healthy young people found it cheaper to pay the penalty than to sign up for the insurance. Insurance companies then are pricing themselves out of the ACA, not the reverse. Their greed overshadows common sense, Reduce the cost of premiums and you have a healthy risk pool, but that cuts into profits and country club memberships and $6 million dollar homes and that — is verboten.

Remember the word GREED. That’s what really causes the outrageous premium increases but the politicians never ever talk about profitability and insurance companies in the same breath. Prior to the passage of ACA insurance companies had whole floors of people with green visors and calculators who spent all their time figuring out new ways to deny coverage. With the passage of Trumpcare in the House the companies that make green visors are ramping up production again. Don’t ever be fooled by the insurance industry claim that they are in the “Risk” business. They take few if any risks. It is you and me and grandma and grandpa that re taking the risks and we are losing

What really pains me, though, is the fact that the astronomical lobbyistpremiums we all pay also are used to lobby against your best interests. That’s right, part of what you pay goes to a budget item or PAC that will lobby congress against your interests. These professional persuaders approach elected officials with bags of your money to persuade them that they should vote against covering pre-existing conditions that could take your life or the lives of people you love. Now that’s gotta be the biggest double cross in world history.

Wendell Potter, a former PR executive for insurance giant Cigna says, “There’s no doubt that one of the reasons Americans pay more for health insurance and for healthcare than people in any other country in the world is because of high executive compensation. There is no real justification for it.”

So there, in a rather large nutshell, is why you pay so much for health insurance. Your politicians, your President, the insurance companies and even some in the media are lying to you. Don’t let them get away with it. Ask them about what you’ve read here. Back them into a corner. Let them know that we know what they are doing and we’re not going to let them get away with it. Resist!

And from where I sit, that’s the truth.



One thought on “The Truth About Health Insurance. It’s Not What You’ve Heard. RESIST!

  1. Well researched, Bob, and well written! Thanks!

    Stupidity is the same as evil if you judge by the results.
    M. Atwood


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