Health Insurance in America and Its Role in Passing the Reform Bill
by: Wayne Nelson
30. Mar, 2010 
1 Comment
President Obama made history this week, signing into law a health-care bill thatâs arguably the most comprehensive social legislation our country has ever seen. The President succeeded where predecessors had tried and failed not only because heâs articulate, intelligent, hardworking and dedicated to the cause. He also triumphed because of a big boost from health-insurance companies.
How did they help? Not through those deals Obama had originally cut with the industry. Rather, Anthem Blue Cross and its parent company WellPoint contributed, probably inadvertently, by pleading poor, deciding to raise health-insurance premiums, and announcing their plan in the last days of the health-care debate. In doing so, they sparked citizen outrage and increased political support for change.
These major carriers want to raise premiums in several states anywhere between 15% and 56%. These rate hikes would affect principally single/self-employed individuals, small business owners and what employees they might have, as well as senior citizens who have their Medicare/Medicaid coverage through private carriers.
Comedy can express wisdom. Are there any better words to express the public mistrust of how Anthem and WellPoint would use their extra money than these by the Geezinslaw Brothers?
âIf I give you the money you want, how do I know youâll use it for the purposes you state and not just gamble it away?â
ââŠOh, I got gamblinâ money!â
In their own styles Managed Care Matters, a recent Moyers broadcast and John Aravosis also illustrate the problem and make the point.
Aravosis writes periodically about being single, self-employed in Washington, DC. As such, if he wants health-insurance coverage he has to fund it out of pocket, this despite yearly double-digit premium increases as dictated by his private for-profit carrier.
Aravosis has written more frequently of late and seriously questions the justification for such hikes. One of his basic arguments is that (1) he can get just as sick whether heâs in group coverage or not, and (2) there are a sufficient number of individual policy holders like himself (34 million alone covered by Anthem, according to Congressional testimony), so that ability to spread risk should not be a problem.
So why plan to raise rates now? Especially when it has to be apparent that the country is in economic doldrums and that the population doesnât have the excess funds that it once did? The insurance companies claim that they must raise rates to maintain profits because health-care costs they must cover have soared and the recession has caused healthy people to drop their coverage.
The real answer however, would seem to go along the following lines, corroborated by Wendell Potter and Dr. Marcia Angell on a recent Moyers broadcast:
1)Â Â Â Â Â Because they can.
2)Â Â Â Â Because they are in business to make a profit first, boost stock price second and worry about the product or service somewhere down the road.
3)Â Â Â Â Because they are targeting primarily those groups who have no Congressional representation and minimal lobbying power and thus canât do anything about it.
4)    Because they calculated a reasonably high probability that a government health-care bill would pass and wished to minimize its impact by acting early â just as credit-card companies did in anticipation of new regulations protecting consumers. (Potter and Dr. Angell are credible sources in part, but only in part because they donât see eye to eye on the billâs merit; he favored passage while she did not, and both support their conclusions with strong arguments.)
The prevailing corporate attitude, as expressed by a representative of the Nestle Company when they closed manufacturing plants in Upstate New York in 2008 seems to be (as paraphrased) âWe are in business to make a profit, not to employ people.â In Congressional testimony executive Angela F. Braly of WellPoint stuck to the corporate line that the additional funds are needed to support operations and offset real or anticipated losses, thus permitting what she classified as a âreasonableâ rate of return to shareholders. It was as if she was saying that they have a God-given right to make money. To my knowledge there is only one industry in this country that has such a right, although itâs court mandated, and thatâs investor-owned public utilities. Even there the concept of âreasonable rate of returnâ has never been properly defined.
It seems to be common knowledge that the insurance industry appears to have plenty of funds available to make substantial payments to lobbyists and political campaigns, as well as for mergers and acquisitions. Case in point is the recent acquisition of an insurance unit of AIG by MetLife, which ran into the billions. Also Liberty Mutual is rumored to want to build a new facility in Downtown Boston, estimated cost $300 million.
During the recent Moyers interview Wendell Potter raised the point that as long as the industry puts profit first, it will continue to raise premiums regardless of what happens to the quality of product or service. He also pointed out, and I think itâs valid, that the downside of the new legislation is that policies offered low-income individuals may have an affordable premium, but the underlying deductible will be so high as to make the premium meaningless and the policy not worth taking. I found this out when I retired as the only dental coverage I could get had a premium and deductible at levels that have made it cheaper to pay out of pocket.
According to Newt Gingrich and like-minded others, the âAmerican Peopleâ donât want to see changes in health-insurance coverage. Iâd like to know what their definition of âAmerican Peopleâ is. I have yet to talk to anyone or read anyone who agrees with his observation. Letâs think on that.
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Long held court precedent settled the question of the purpose of any for-profit business – as expressed in 1919 in Dodge v. Ford Motor Company:
The Court held “that a business corporation is organized primarily for the profit of the stockholders, as opposed to the community or its employees. The discretion of the directors is to be exercised in the choice of means to attain that end, and does not extend to the reduction of profits or the nondistribution of profits among stockholders in order to benefit the public, making the profits of the stockholders incidental thereto.”
It is settled law – businesses exist to makie a profit – and the directors have no legal authority to intentionally do otherwise.
Now the argument can be debated as to whether insurance companies should or should not be businesses, as the same debate could be had about hospitals and providers who provide the care. In my opnion, the answer to these questions comes down to what entity is likely to do the most effective job delivering the services needed. Experience with Medicare and Medicaid as well as the Veterans Administration would strongly suggest the government is not the most effective provider of these services. One could turn to non-oprofits, but the scale of the industry strains any credibility that such a scale of services could be maintained.
So rather than rail at the fact that insurances as business make a small 3.3% profit margin, profits that courts have long held businesses MUST try to make, we should be looking at the costs that make up the other almost 97% of the premiums and determine ways to lower that 97% cost. I would suggest there is a lot more cost resuction possible than the measely 3% of profits to be gained by looking at tort reform, alternative delivery networks (for example redirect non-emergency visitors arriving at the emergency room to later appointments with doctors elsewhere as they do successfully in New Zealand) and increased competition across state lines.