Why We Should Fire the Health Insurance Industry
The Orange County Register recently ran a story about a proposed rate increase on Aetna health insurance products for small employers (http://www.ocregister.com/articles/insurance-347932-aetna-health.html). Excerpts:
Connecticut-based Aetna Life Insurance Co. has raised its health insurance premiums on small employers with 73,000 members an average 30.3 percent over two years, which the California Department of Insurance on Thursday called "unreasonable."
It is the state's first-ever such finding, but the state has no power to block the increase.
The latest increase effective April 1 is an average 8 percent annually with a 30.3 percent hike over 24 months for small employers with Aetna's PPO health insurance policies.
The department found that Aetna made projections about medical cost increases higher than the U.S. Bureau of Labor's medical cost inflation index and unsupported by Aetna's actual claims experience.
Aetna released the following statement:
"While rate increases are never easy, our rates are based on actuarially sound data and reasonable projection of future cost, which will impact approximately 16,000 customers. Our Medical Loss Ratio is at 86.7%, which is higher than any of the filed rates by our competitors. Medical loss ratio is the percentage of health insurance premiums that insurers use to provide health care to their customers."
In making its finding, the Department. of Insurance noted that the Aetna subsidiary that sells health insurance in California made a 27.7 percent profit in 2011 and paid $1.7 billion in dividends to its parent company.
Aetna has paid dividends to its parent company in each of the past four years, the department noted. It paid $1.9 billion in 2010, $147 million in 2009 and $675 million in 2008.
The 185 page Aetna rate filing with the Insurance Commission in California can be found at: http://www.insurance.ca.gov/0250-insurers/HlthRateFilings/upload/AetnaHA...
Dr. Don McCanne's comment:
The insurers are correct when they say that health insurance premiums are increasing because health care costs are increasing. But what is especially relevant are the reasons that Aetna gives for our high health care costs and what Aetna is doing to try to control them (obviously not very successfully).
Read pages 43-49 (labeled 1-7, but 43 pages into the filing) of the Aetna California rate filing (link above). You will see that Aetna has absolutely no control over many major factors contributing to health care inflation. You will also see that Aetna is fumbling around with many programs that will have little impact on health care costs, except that they do increase administrative expenses. You will also see that several of their measures smack of the intrusive and choice-limiting insurer behaviors of the managed care revolution.
Instead of sympathizing with Aetna in their ineffectual struggles to control health care spending, we should look at their waste and their intention to sacrifice high system performance on behalf of their own business interests. Foremost we should look at those perverse cost increases over which Aetna pleads they have no control and then imagine the power that our own single payer national health program would have in the same situation.
Take Dr. McCanne's advice and look at how Aetna (and by extension, the entire health insurance industry) defends their inability to control health care costs. Aetna produces a litany of sad tales intended to induce sympathy for its plight. Yet, nowhere in their document defending the rate increase do they identify the two principle problems driving American health care costs sky high: 1) quality waste; and 2) inefficiency. How is it that Aetna in California can defend massive rate increases while reporting a profit of 27.7% with $1.7 billion in dividends?
We should fire the health insurance industry because they are manifestly unable to do what we pay them to do: efficiently pay medical bills and manage our health care costs.
Dr. Joe Jarvis