The nation's five biggest insurance companies made $12 billion in profits last year, but dropped 2.7 million people from their roles, according to a report released today by Health Care For American Now, a health reform advocacy group.
The report, which draws on the companies' U.S. Securities and Exchange Commission filings, found the overall profits for the big five —UnitedHealth Group, WellPoint, Aetna, Humana, and Cigna — were up 56 percent since 2008. Only Aetna's profits fell.
Avram Goldstein, research director for HCAN, told Shots his team compared the earnings numbers for the big five over the years: "[T]hey've never come close to these numbers before," with the exception of 2007. That was "a very good year, around $11 billion. But this is a record," he said. And, the growing profits defied a major recession, which last year was in full swing. Goldstein said the companies' profitability rose because of rate hikes and increased cost-sharing — meaning a greater burden of co-payments, deductibles for policy holders, though insurers refute that claim.
The report comes at an opportune time for overhaul advocates and officials hoping to jump start the reform debate. For instance, it plays right in to the White House's hand in the standoff between the Obama administration and Anthem Blue Cross over the insurer's decision to raise premiums for some California policy holders by more than a third. Anthem, a subsidiary of big-five insurer WellPoint, is specifically called out in the report, which suggests the California insurer hiked rates for sick people in order to 'purge' them from their roles and remain profitable.
America's Health Insurance Plans, an industry group, said the rate increases reflect the rising costs of medical services. Insurance companies' administrative costs — including profits — shrank last year "while spending on hospitals, physicians, and prescription drugs continued to soar," said Robert Zirkelbach, an AHIP spokesman. "For every dollar spent on health care in America, less than one penny goes towards health plan profits. Health plan profits are well below other industries within the health care sector," he said.
Goldstein sees it differently. "One penny of the health care dollar comes to about $25 billion a year, or $250 billion over 10 years, equal to one-quarter of the cost of the entire health reform package. That's quite a penny."