Saturday, December 5, 2009

Health Insurance Companies suck dot com

Health insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.

In a third-quarter earnings conference call in late October, officials at Aetna announced that in an effort to improve on a less-than-anticipated profit margin in 2009, they would be raising prices on their consumers in 2010. The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

"The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering," said chairman and CEO Ron Williams. "We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year."

Aetna's decision to downsize the number of clients in favor of higher premiums is, as one industry analyst told American Medical News, a "pretty candid" admission. It also reflects the major concerns offered by health care reform proponents and supporters of a public option for insurance coverage, who insist that the private health insurance industry is too consumed with the bottom line. A government-run plan would operate solely off its members' premiums.

Aetna actually made a profit in 2009 but not at levels that it anticipated.

"They were surprised by an acceleration in medical costs in 2009 which pressured their earnings," Josh Raskin, an industry analyst for Barclays Capital, told the Huffington Post. "In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace."

As Williams told investors on the call: "The pricing that we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering."

Aetna is one of the largest insurers in the private market, covering roughly 17.7 million people according to its 2008 annual report. It is also a major player in the current health care debate and inside Washington D.C. The insurance company has spent more than $2 million on lobbying just in 2009, according to the Center for Responsive Politics.

American Medical News, which first reported the story, noted that this is not the first time the insurance giant has cut the rolls in an effort to boost profit margins. "As chronicled in a 2004 article in Health Affairs by health economist James C. Robinson, MD, PhD, Aetna completely overhauled its business between 2000 and 2003, going from 21 million members in 1999 down to 13 million in 2003, but boosting its profit margin from about 4% to higher than 7%."

A spokesperson at Aetna did not return calls and emails for comment.

My comments: Here is my favorite part of this article... "Aetna actually made a profit in 2009 but not at levels that it anticipated." Please... someone explain to me how the people at Aetna sleep at night. Makes me sick.


Tuan said...

As we can listen to the health care debate and business in general, we have to ask how much profit is fair? Having worked for insurance companies, if you don't make the monies that your investors believe that you should make, then you do not have capital to invest in the future or grows your business. Companies fund future projects with current dollars hoping for a positive outcome. If we leave the profit discussion, we should examine the question if healthcare is a right or a privilege? Depending on where you stand on this, you opinion can be very different. Then you also have to ask, how should people be involved with the purchasing of their care. Should they shop around for best doctors or look for the cheapest ones? Also, should they have every test done or take every medication that is prescribed? There is a cost to both and how can a consumer be informed so that they can make a good healthy and financially good decision. Then lastly, the healthcare services itself needs to be looked at because as a service, the producers want you to utilize their services as much as possible so there no incentive to reduce services which ultimately someone has to pay. So even though it is easy to point to the insurance companies, not saying they have no accountability, there are also other people that need to get in line so that we can have a better system. If this was an easy debate, it would have been solved long ago.

AttorneyMedic said...

Thanks for your comment, Tuan. But let me ask you this... when is the last time the insurance companies for which you worked LOWERED their rates? If they are going to raise them during bad times, why don't they lower their rates in the times their profits exceed expectations?

Tuan said...

great question and I would ask "when it is the last time that doctors or hospital lowered their rate"? or how does new medical equipment or new drugs get discovered? You can't point to one part of the system, you have to look at it as a whole.

AttorneyMedic said...

Doctors don't set rates. The health insurance company industry does via fee schedules. R and D for new medications are backed by federal funds.

Tuan said...

Doctors and hospitals negotiate with insurance companies on rates all the time. It is supply and demand. That is why not all doctors or hospital accept every insurance company. The government very badly negotiate some pharmacy discounts last year for Medicare.

Tuan said...

to complete the circle.. Do you know who the doctors blame on having to charge higher for their services? lawyers and lawsuit.. That is why caps on lawsuits is part of the healthcare debate.

AttorneyMedic said...

Yeah. I'm sure it has nothing to do with all the money our esteemed lawmakers receive from the health insurance industry. A recent study by the National Academy of Sciences found that up to 98,000 Americans die needlessly in hospitals each year because of care and safety deficiencies. American medicine is unsurpassed in developing new ways of fighting disease and saving lives. But when it comes to preventing medical errors, the record leaves much to be desired. The attorneys are not the problem. It's the doctors themselves that are the problem.

Tuan said...

I believe that all people should have access to care. Not all care but some level of care. I know there are inefficiencies in the system. I know there are ways to prevent medical errors to save lives. I'm willing to pay for some of this for other people. The question is how do we get there without over taxing the people that want to help or having people work the system because legislators aren't willing to make the hard decisions. For the company that I worked for with Medicaid insurance, in some states, the insurance companies are required to pay back the state if they do not spend a certain percentage of money to medical care. So for every dollar they get, .80-.90 cents on medical, .10-.13 cents on doing business, and the profit is what ever they can squeeze out of cost.