More Pre-Summit Hype
A group partly supported by the Service Employees International Union is out with an ad that criticizes insurance companies and asks: "If health reform fails THEN what?" The Foundation for Patients’ Rights TV spot highlights the well-publicized rate-hike (as high as 39 percent) that had been planned by California’s Anthem Blue Cross — and which was postponed after public criticism from the Obama administration. But the ad also includes this shaky claim about the insurance industry: "2.7 million Americans were denied coverage" last year.
That implies that the big insurance companies canceled policies — and some viewers may well get the impression these 2.7 million Americans were "denied" because of their health status. But the back-up for the claim makes it clear that that’s not true. The figure comes from a report by the liberal Health Care for America Now, which shows that the number of private health plan enrollees declined by that much from 2008 to 2009 for five major insurance companies combined. (And those covered by public plans administered by the companies increased by a net 688,000.) Yet the report states that HCAN can’t say why all those persons were no longer enrolled, and it notes that rising unemployment likely played a large role.
HCAN report: Many of the 2.7 million Americans whose health benefits expired were casualties of an economy that has lost millions of jobs since 2007. But many others—the exact tallies are trade secrets—were victims of an industry practice called purging, in which sharply higher premiums push individuals with health problems or employers with sicker or older workforces away from continuing coverage.
An industry spokesman, Robert Zirkelbach of America’s Health Insurance Plans, also said that economic factors were behind the decline in enrollment:
AHIP’s Zirkelbach: As families have struggled during the current recession, some people who don’t have immediate health care needs chose to drop their health insurance. Moreover, some employers have scaled back the coverage they offer or stopped offering coverage to their employees altogether.
The ad also says: "Last year, Big Insurance set a new record – 12 BILLION in profits." That also comes from the HCAN report, which shows that the combined 2009 profits for the five companies totaled $12.2 billion, a 56 percent increase from 2008. Certainly, insurance companies make money — and a 56 percent increase sounds impressive. But a closer look at the HCAN report and the companies’ financial statements reveals a few interesting points:
- Aetna actually posted a decline in year-to-year profits of 8 percent.
- 2009 was no record year for UnitedHealth, either. The company’s profits went up 28 percent to $3.8 billion in 2009. But profits had declined 36 percent the previous year. In 2007 profits were much higher — $4.65 billion — than they were last year.
- WellPoint made $4.75 billion in net income in 2009, an increase of $2.3 billion over 2008. But that was mainly due to a one-time gain of $1.8 billion from the sale of a pharmacy benefit management company. The previous year WellPoint posted net investment losses. Taking those factors into consideration, WellPoint reported that its "adjusted" net income for 2009 was $2.9 billion, unchanged from 2008.
- Cigna’s profits jumped $1 billion for a whopping 346 percent increase over 2008. Why such a huge change? Part of the reason is that Cigna posted a $646 million loss in 2008 from winding down its now-inactive reinsurance operations, which are not part of its health care operations. Looking only at Cigna’s health care division, the profit for 2009 was 10 percent higher than that in 2008.
Were profits really a "record?" Perhaps so, as measured in dollars. But AHIP’s spokesman said profit margins were being squeezed compared to some earlier years. An industry-sponsored Web site posted figures showing that the five largest health plans had an average profit margin for 2009 that was 5.2 percent, and for 2008 was 3.2 percent. Margins had been higher in 2005 (6.4 percent), 2006 (5.4 percent) and 2007 (5.6 percent.)
Categories: The FactCheck Wire