Insurance Companies Prosper, Families Suffer: Our Broken Health
Insurance System
Introduction
Recently, Anthem Blue Cross of California, an insurance company
owned by the for-profit company WellPoint, Incorporated, announced
that its individual market premiums would rise by as much as 39
percent in the coming months. This shocking increase isnft unique.
Across the country, families have seen their premiums skyrocket in
recent years, and experts predict these increases will continue.
Sandy Praeger, a leader of the National Association of Insurance
Commissioners, predicts that we will gsee rate increases of 20, 25,
30 percent.h1
These massive increases are disturbing examples of the problems
that make reforming our health insurance system more important than
ever.
Premiums Rise, Insurance Industry Profits Increase, Health Care
Costs Cripple Working Families
Anthem Blue Cross of California announced that its individual
market premiums would rise by as much as 39 percent in the coming
months. After Secretary Sebelius and state officials asked for a
public justification for these increases, Anthem Blue Cross delayed
raising its rates for two months.2
Anthem Blue Cross isnft alone in insisting on premium hikes.
Anthem of Connecticut requested an increase of 24 percent last year,
which was rejected by the state.3
Anthem in Maine had an 18.5-percent premium increase rejected by the
state last year as being gexcessive and unfairly discriminatoryh4
– but is now requesting a 23-percent increase this year.5
In 2009, Blue Cross/Blue Shield of Michigan requested approval
for premium increases of 56 percent for plans sold on the individual
market.6
Regency Blue Cross Blue Shield of Oregon requested a 20-percent
premium increase.7
UnitedHealth, Tufts, and Blue Cross requested 13- to 16-percent rate
increases in Rhode Island.8
And rates for some individual health plans in Washington increased
by up to 40 percent until Washington State imposed stiffer premium
regulations.9
Leading experts have predicted that, without reform, these
increases will continue, and the federal government and most states
donft have the legal authority to block or reduce health insurance
rate increases.10
WellPoint and others claim that the premium increases are
necessary given the rise in health care costs. While rising health
care costs is a known problem with our broken health care system,
some of the premium increases requested by insurance companies are 5
to 10 times larger than the growth rate in national health
expenditures.11
All the while, insurance companies and their CEOs continue to
thrive.
Recent economic data show that profits for the ten largest
insurance companies increased 250 percent between 2000 and 2009, ten
times faster than inflation.12,13
Last year, as working families struggled with rising health care
costs and a recession, the five largest health insurance companies –
WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in
combined profits of $12.2 billion, up 56 percent over 2008.14
These health insurance companiesf profits grew even as nominal GDP
decreased by 1 percent over this same time period.15
WellPoint accumulated more than $2.7 billion in profits in the most
recent quarter alone.16
And recent data show that the CEOs of Americafs five largest
insurers were each compensated up to $24 million in 2008.17
Now, while insurance companies enjoy increasing profits and CEOs
take in millions, American families struggle to find and maintain
affordable, quality insurance coverage. A recent study found that
almost 75 percent of individuals looking for coverage on the
individual market never bought a plan, with 61 percent of those who
did not purchase insurance citing premium costs as the primary
reason.18
A Broken Health Insurance System Works for Insurance Companies –
Not Families
Our broken health insurance system has allowed these premium
increases to occur. More than 94 percent of insurance markets in the
United States are now highly concentrated.19
Without competition, insurers have no reason to drive costs down,
and without additional choices in the marketplace, consumers have no
choice but to continue to pay, or lose coverage. As premiums go up
in the current economic climate, more and more families are priced
out of the market altogether, making a bad situation worse.
The gvalue gaph in the health insurance market is evident not
just in overall premium hikes, but also in the use of those premium
dollars. Over the past decade, the amount private insurance
companies spent on administrative costs grew faster than the amount
spent on prescription drugs, a trend that is projected to continue
through the next decade.20,21
Three of the top five insurers cut the proportion of premiums they
spent on customersf medical care last year, committing more to
salaries, administrative expenses, and profits.22
Finally, while insurance company profits rise, these companies
provide less and less security for American families. The six
largest publicly held insurers insured 2.2 million fewer people in
the first three quarters of 2009. If the rest of the insurance
industry exhibited the same trend, 4.2 million people – or around
15,000 people per day – would have lost private insurance over this
period.23
Health Insurance Reform Will Fix Our Broken Health Insurance
System
Health insurance reform seeks to drive down costs, put consumer
power and choice in the hands of the American people, and ensure all
Americans receive the health care services they need and
deserve. These efforts wonft just help our health care system –
they will also help our economy. Lowering health care costs through
reform could generate 250,000 to 400,000 jobs a year.24
And reform will drive down premiums and limit out-of-pocket costs
that eat into the family budget.
Reform will:
Place additional oversight on health insurance companies
to ensure that people get value for the premiums they pay.
Insurance companies will have to report how they spend the premium
dollars they collect from their customers. If they spend too much on
administrative costs and profits, they will have to give some of
that money back to their customers. Insurance companies will also
have to provide public justification for premium increases.
Consumers can use this information to help decide whether they want
to purchase a particular plan. And if insurance companies are not
able to justify their premium increases, they could be barred from
participating in the health insurance exchanges.
End Arbitrary Limits Placed on Coverage by Insurance
Companies. Under health insurance reform, families will no
longer face lifetime limits to their benefits, nor will coverage be
denied or watered down based on medical history. As a result, health
insurance will provide real protection from high health care
costs.
End Insurance Company Discrimination. Health
insurance reform will prevent any insurance company from denying
coverage based on underlying health status. It will end insurance
discrimination that charges families more if a family member has or
had any illness, and limit differences in premiums based on age.
Create Competition Among Insurers with a Health Insurance
Exchange. Health insurance reform creates a marketplace –
or gexchangeh – for insurance competition that will drive down
premium prices for Americans. The health insurance exchange will
bring families and plans together into one organized marketplace so
families can compare prices and health plans in order to decide
which quality, affordable option is right for them. Health insurance
reform will guarantee every American a choice of health coverage,
even if someone loses a job, switches jobs, moves, or gets
sick.
Ensure Value in Our Health Care System. By
rewarding high-quality and efficient care, encouraging care
coordination, and reducing medical errors, health reform will slow
the growth in health care costs and ensure value for every health
care dollar spent.
Lower Premiums. The Congressional Budget Office
estimates that reform will streamline administrative costs of
insurance companies and bring more people into the insurance market,
lowering premiums of a comparable plan in the individual market by
14 to 20 percent.25
That means more money in the pockets of American families and the
security of having high-quality coverage.
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