60 Responses to REPORT: Insurance company rate hikes driven by greed, NOT underlying medical costs [UPDATED]

1. Bill Egnor March 2nd, 2010 at 11:11 am «

   Thanks for bringing this to our attention Jason.

   It has always felt that way, but it is far better to have solid evidence like this.
2. Casual Observer March 2nd, 2010 at 11:15 am «

   I wonder what the net profit line would look like if added to the graph. Solid post Jason, thanks.
• Jason Rosenbaum March 2nd, 2010 at 11:20 am «

  That one is less of a trend, due to stock buybacks, stock prices, selling and buying of companies. But an interesting thing to look at. There are probably some other Wall Street indicators to look at that get at the amount insurers are skimming off the top more clearly.
3. jurassicpork March 2nd, 2010 at 11:21 am «

   Well, lookie lookie who the “President” was from 2001-2008 when premiums began skyrocketing. Strictly a coincidence, I’m sure.
4. IllinoisLibertarian March 2nd, 2010 at 11:37 am «

   What do you think accounts for the discrepancy between medical inflation and payments to providers?
• Jason Rosenbaum March 2nd, 2010 at 1:07 pm «

  Profit and administration for doctors and hospitals, or at least in part.
• masaccio March 2nd, 2010 at 4:45 pm «

  I don’t see drug companies in the graph.
5. SantaBarbaraRose March 2nd, 2010 at 11:40 am «

   I’m self employed, so I’m in the individual market in California. My Blue Shield premiums have gone up 433% since 2000. I’ve never been hospitalized nor do I have any chronic conditions. In fact I go to see a Dr only 3 times a year- an annual gyn exam, a mammogram and a routine visit to a Dermatologist.
   It’s very easy to see, using simple Math that are increasing their premiums in order to increase their profit.
• Jason Rosenbaum March 2nd, 2010 at 1:07 pm «

  Criminal.
6. canadianbeaver March 2nd, 2010 at 1:31 pm «

   Since you are the resident expert on this subject Jason, what do you make of this little gem?

   http://www.cnn.com/video/#/video/health/2010/03/01/cohen.health.care.bills.cnn?hpt=C2

   Kind of like the dentistry scam. You know, need an xray of a tooth, first thing they ask you is if it is to paid in cash, or under a “plan”….this is what is wrong with healthcare, and I don’t see any of these health insurance reform blah blah blah’s dealing with this scam.
• Jason Rosenbaum March 2nd, 2010 at 1:34 pm «

  Sure, there’s a lot of waste (profit to someone) to be squeezed out.
• canadianbeaver March 2nd, 2010 at 1:42 pm «

  Squeezed out? Wouldn’t think of it as waste as much as blatant corruption. All along we’ve all been painting those evil insurance companies as the main guilty, but when you actually think about it, the entire system is rotten to the core….did you watch that video? $1000 for a g-damn toothbrush? Wonder why insurance rates are so high???
• Jason Rosenbaum March 2nd, 2010 at 1:58 pm «

  Well, if you look at the chart, even the gouging by hospitals is outstripped by the rate hikes by the insurance companies.
• gtomkins March 3rd, 2010 at 6:08 am «

  Itemizing hospital bills is what’s crazy

  It’s expensive to keep people in a hospital largely because of the nursing care people in a hospital require. Yet that single greatest expense a hospital incurs is not listable, or at least not fully listable, on the itemized bill required by foolish laws, because it is impossible to sort out the attribution of nursing effort to one patient versus all the others in the hospital at the same time. So nursing costs, and many admin costs that also cannot have their attribution broken down to individual patients, are tagged onto items that can be attributed to the individual patient, such as the toothbrush, or hospital gown. Similar stupid accounting/billing requirements are what got us the $900 hammer on B-1 bombers.

  This is not to say that either hospitals or defense contractors are blameless in price inflation. It’s stupid that the hospitals have to generate an itemized bill for services that are largely not itemizable, but, yes, that bill is scandalously high in total, not just in its separate items, which are inherently fictional. The hospital chains and Big Pharma vie with the medical insurers for which can add more unnecessarily high costs via the miracles of monopoly and cartel pricing. Actually, use of the word “vie” is misleading there, because it implies that these are separate cartesl competing with each other, where they are actually pretty much all in bed with each other in one grand medical cartel. It’s like OPEC, only the Saudis have less firm control over that cartel, and more scruples about gouging their victims.
7. onitgoes March 2nd, 2010 at 2:45 pm «

   I had someone on an airplane this morning try to me how the USA “still had the best health care in the world.” I said: perhaps, but only if you can afford it. The conversation deteriorated from there.

   All I know is that, like SantaBarbaraRose, I’ve watched my premiums go up, along with my deductibles, and that many things that used to be covered by my ins no longer are. I am among the very lucky few who has a good job with decent health insurance options. Also, I’m very healthy and rarely need to see the doc. except for routine annual stuff. But being a certain age requires more blood tests that looks for more detailed info than when I was younger. Despite my good health and lack of taking any meds, I still am more out of pocket than I was not too many years ago.

   I tremble if something “bad” happens to me bc I think the adage is true: for those who are lucky enough to have health ins these days, it “seems” good enough until disaster strikes. I fear that most of us lucky ones are just one disaster away from potential bankruptcy. Those without health ins are really up the creek.

   This person on the plane was whining about how “government run health care” – as in a public option – was crummy bc who wants some gov’t staff person to decide what health care you get. I asked: but what’s the difference between that and some insurance agent/staff deciding on what health care you get??????

   This person was good at babbling out a lot of stuff, but I never really got a good answer to my question, other than him stating over & over that I had a “contract” with the ins. company, and they were “obligated” to pay for my health care. I just said: hope you don’t have a disaster & have that theory tested some day, and by the way, I suggest that, with a young family to support, you start saving for a rainy day.

   It’s just b.s. to state that medical costs are driving up ins. costs. It’s clear as day that Big Ins fat-cat CEOs are driving up the costs to line their pockets. The end.
• Blutodog March 2nd, 2010 at 4:49 pm «

  The costs are going up because they can. The whole rotten edifice is going to come crashing down at the present rate of greed. The CEO’s don’t care they figure they’ll be out and retired with a solid Gold pension before that happens.
8. tropicgirl March 2nd, 2010 at 5:41 pm «

   I was wondering where this article was going to address how the Obama plan would actually control or reduce costs, pr control extra charges for additional needed benefits or equipment, control costs on drugs, control deductibles (now up to $5,000 per year for an affordable policy) or how the Obama plan would stop insurance companies charging three times as much for a pre-existing condition?… because it won’t at last look.

   As far as I know the Obama plan would not address the cost issues much at all, and would not have much authority to challenge what would be a continuing monopoly with a captive patronage. I would like to see that addressed somewhere if anyone thinks that matters, as long the health plan is still being presented here.
• Jason Rosenbaum March 2nd, 2010 at 5:57 pm «

  This is a bit of a stretch. The House bill controls deductibles and pre-existing conditions and a lot of medical expenses very well. The Senate less so, but with the fixes being contemplated, it gets better. To say cost issues aren’t addressed is a misreading.
• Nathan Aschbacher March 2nd, 2010 at 6:10 pm «

  I assume you mean in purely nominal Dollars, rather than real? You don’t get to count subsidies as “lowering costs.”
• Jason Rosenbaum March 3rd, 2010 at 6:26 am «

  No, both.
• smcclurk March 2nd, 2010 at 7:11 pm «

  I don’t see how you can even type that with a straight face? How exactly does either of these bills control costs? And please don’t even try to cite Jonathan Gruber’s sham analysis. That has been proven faulty. Why doesn’t your bill do anything about the price gouging? Your idea of cost control comes from a faulty presumption that health care costs rise because people use it too much. That’s the only way you can justify a mandate and a health care tax. The real problem is that the entire system rewards doctors, hospitals, and insurers for ripping off their patients, customers, and the tax payer. Any semblance of cost control was ripped out when weak-kneed Obama bargained away the Public Option, Drug price negotiating authority, and drug re-importation. This bill is nothing but a travesty.
• Jason Rosenbaum March 3rd, 2010 at 6:29 am «

  Read the CBO reports, especially the ones for the House.
• tropicgirl March 2nd, 2010 at 9:07 pm «

  If you call controlling costs of deductibles allowing the current $2000 – $5000, what good is that? Axelrod came out specifically saying they can no longer DENY pre-existing conditions, and they can’t charge 5X as much as a regular policy, JUST 3X as much.

  Combine this with mandates and no drug purchasing reforms, and I can’t see how this is controlling costs at all. I really think what they mean by “controlling costs” is “increasing their income massively”, through mandates.

  At least that the factual information I have gotten the last time someone talked specifics, which was a while ago.
• cassiodorus March 2nd, 2010 at 11:16 pm «

  The real question is one of what real constraints keep the insurance companies from denying PAYMENT OF CLAIMS. So what if they issue you a policy, if it doesn’t pay on your claims?
• Jason Rosenbaum March 3rd, 2010 at 6:33 am «

  Both the House and Senate bill cap deductibles, eliminate benefit caps, enforce minimum benefit standards, stop denials of care for pre-existing conditions and limit how much more companies can charge if you’re sick. All of these things are major improvements to how insurance works now.

  The Senate bill does not go far enough in some of the regulations, the competition, or the subsidies aspect. That’s why it needs to be fixed.
• Primrose March 2nd, 2010 at 6:03 pm «

  I’m not sure that the Senate Bill does address rising premium costs.

  It’s certain that if the House Bill had passed premiums were addressed by offering a government sponsored option. The inherent competition would have covered premiums by forcing private insurers to reduce their premiums or stop insuring people — and then it would have been a matter of watching “legitimate” medical costs and making premium adjustments to the government plan to cover those “reasonable” costs.
• Larue March 2nd, 2010 at 6:19 pm «

  Obama’s plan, the Senate Bill as is, are losers, we all know it, that’s why Pups are up in arms and making calls daily.

  You want change we’ll have to FIGHT for the change, who are you calling, what’s your message and what’s your leverage on the ones you call?

  Myself, it’s all about Nov. ’10 and the ’12 elections. The closer they come, the more the Dem’s have NO real reform at hand the bigger are gonna be their losses. And that leverage of re-election still counts for Senators and Reps, if not for the WH (Obama has proven he don’t care about having two terms).

  In the meantime, this post is about HCAN’s release of their study and Kaiser’s research, and it’s a glorious thing.

  Be happy for a victory, work hard for the changes you want, what else can we do? It’s a tall and steep mountain we are climbing.
• cassiodorus March 2nd, 2010 at 6:55 pm «

  I don’t really see a “win” for us under the prevailing political climate. Apparently the White House is trying to get the House to pass the Senate version, accompanied by some nebulous promise that there will be “reconciliation thereafter.” I guess they expect the House to play the role of Martha Coakley eight months from now, and are putting out the casting call in advance.

  And, as for what the Senate version will ‘do for us,” would you all like to explain to me how-exactly the law is to be enforced against delinquent insurers?
• smcclurk March 2nd, 2010 at 7:01 pm «

  Thanks Cass. That’s exactly the point. For all of Jason’s talk, this terrible bill just throws money at the insurers and does nothing to curtail their profiteering. It punishes people for getting insurance deemed “Cadillac” by some bought off shill in Washington and mandates that they have to buy a faulty, junk product from the criminals causing the problem. No real rate regulator and nebulous talk of enforcing medical loss ratios without the mechanism spelled out explaining how to do so. Where oh where are the cost controls?
• cassiodorus March 2nd, 2010 at 7:07 pm «

  You’re welcome.

  It punishes people for getting insurance deemed “Cadillac” by some bought off shill in Washington and mandates that they have to buy a faulty, junk product from the criminals causing the problem.

  My understanding was that it mandates that they pay a 2.5% income tax penalty. I fully expect great numbers of healthy people to pay that penalty, and to buy insurance at astronomical rates when they become sick.
• smcclurk March 2nd, 2010 at 7:14 pm «

  Actually I fully expect this ridiculous tax to never truly be enforced. It will be another AMT that gets adjusted every year to prevent voters from feeling it. If that’s the case, then why even pass this crap? Tax the rich and all bonuses. There’s more than enough money at the top. We should know, they stole it from us.
• cassiodorus March 2nd, 2010 at 7:18 pm «

  This is being passed so it can be added to Obama’s CV. I think we ought to go nationwide, and announce “Martha Coakley Casting Calls” for each Congressmember who dares vote to pass the Senate bill.
9. hctomorrow March 2nd, 2010 at 5:47 pm «

   But as Jon Walker has discussed, the Exchange will allow low quality high deductible junk insurance plans.
10. ubetchaiam March 2nd, 2010 at 5:54 pm «

    Thanks Jason bbbuuutttt we have a unique history regards health insurance that must be maintained (paraphrasing Obama); too bad no one had the cojones to say to him, ‘Well, Mr.President, we had well over 200 years of slavery that was accepted as ‘historical’; do we have to wait another 200 years before the idea of healthcare being premised upon profit is overeturned?
11. Scarecrow March 2nd, 2010 at 5:59 pm «

    Suppose the insurance profits represented 1% of the total cost of the total non-public care system (just a hypothetical).

    then suppose the insurance profits rose by 75%. It could also be true that the insurance profits represented only 1.5% of the total costs of care.

    So it seems to me the graph is comparing percentage changes, but not really telling us how large a % insurance profits represent in total costs.

    If, after these exhorbitant increases, insurance profits still represent only 3-5% of the total costs, then you could completely eliminate insurance profits and but reduce total costs only by that 3-5%.
• smcclurk March 2nd, 2010 at 6:58 pm «

  No, you’re completely buying the insurance company line and it is a lie. Remember, executive salaries and all the money they spend on researching how to deny people is counted as “administrative costs.” When you realize that 30% of the premium dollar is “administrative costs” as opposed to the 3% it is for Medicare, you can figure out that your 3% profit rate masks an additional hidden profit of 27%. These criminals are really making 30 cents off of every dollar. No business on earth makes that much money.
• Scarecrow March 2nd, 2010 at 7:34 pm «

  No, I’m not buying anyone’s line. I’m making a methodological point; I’m not asserting the level of profits is okay, good or bad.

  The table tell us insurance profits are rising faster in percent terms than medical costs/billings, but it does not tell us what we need to know about how serious this problem is. My comment is not a defense of those profits or how fast they’re rising nor that the levels are reasonable.
• smcclurk March 2nd, 2010 at 7:42 pm «

  I don’t understand what you are contesting then? The last sentence of your previous post implies that the profiteering of the insurers is not the problem. You assert that you could totally cut out their “profits” and there would still be huge costs. I responded by pointing out you aren’t counting all of their real “profits” because you are taking as a given that “administrative costs” truly reflect medical costs and not padding of bills to ensure opulent lifestyles of insurance industry executives. The insurance industry uses the very argument you used to justify their behavior. They know most people don’t realize that executive pay and the pay for all the people employed to deny them coverage isn’t included in calculations of profit. Yet those “administrative costs” are the greatest drivers of insurance premium inflation. Raising the price ensures an annual 30% return on their money.
• Jason Rosenbaum March 3rd, 2010 at 6:31 am «

  Insurance profits are 3-5% and rising, but add in their administrative costs and you get something like 15%. Nationally, insurance companies spend 86% of their premium dollars on care, where Medicare spends 97%. So there’s a lot of fat there to cut and make a real difference. Though certainly there are other places in the system where cost must be addressed, no question.
12. Synoia March 2nd, 2010 at 6:00 pm «

    Jason, percentages don’t make the case. Nor is it clear that you can compare insurance premiums with medical costs because of the effects of SCHIP, Medicaid and Medicare. You have to show that the population buying medical insurance is statistically the same population incurring the medical costs, and that you fail to do.

    A valid way to do the analysis and determine if the Insurance Companies are gouging us is to plot the gross revenues, the actual profits, and the SG&A expense, and medical losses reported make the case for excess price rises.

    The SG&A analysis for the companies year-by-year can also determine if there are excessive costs there.

    Sorry, you charts are worthless because of the population mismatches, the elderly, poor and children are not consumers of health insurance, consequently any conclusions drawn in the manner you make them are invalid.

    Not necessarily wrong, Invalid due to incorrect method.
• Jason Rosenbaum March 3rd, 2010 at 6:26 am «

  That’s not what the insurance industry claims. They claim simply that their rates are going up because underlying costs are going up. They’re not going up at the same rate.
13. TheLurkingMod March 2nd, 2010 at 6:03 pm «

    Eli is upstairs!
    Why Is This Man Smiling?
14. IllinoisLibertarian March 2nd, 2010 at 6:03 pm «

    Is there reliable information out there regarding what % of premiums are paid out by the insurance companies on claims (national average)?
• Jason Rosenbaum March 3rd, 2010 at 6:26 am «

  Yep, Medical Loss Ratio is a reported number.
15. Cynthia March 2nd, 2010 at 6:07 pm «

    Health insurers wouldn’t be trying to slap their customers with double-digit rate increases if they hadn’t milked their cash cows bone dry to pay for high-priced lobbyists to convince Congress and the White House that their top dogs must continue to live like fat cats.

    http://www.mcclatchydc.com/2010/02/24/88119/as-insurer-hiked-rates-39-executives.html
16. Larue March 2nd, 2010 at 6:15 pm «

    Jason, HUGE score on the part of HCAN with this info!!

    Thanks SO much for sharing it!!

    Blows the effing hole in the tort reform and medical providers being responsible for rising costs theory!!!

    Blows all that kabuki all to hayall and back again!!

    Why do I all of a sudden feel some traction and hope on some of these reform issues at stake?

    No merlot here, THAT can’t be it!! *G*

    Nice work, hoss, and thanks again . . . this is ammo for the trolls who were here earlier today!! *G*
17. marwick March 2nd, 2010 at 6:49 pm «

    If insurance companies are so concerned with costs they should do the same as Medicare and only pay doctors 60% of their salaries. Too many people cannot afford premiums and doctors should not get fat off of hurting people.
18. bmull March 2nd, 2010 at 7:09 pm «

    Totally misleading. If I plotted my height and weight on this graph it would look to the casual observer like my weight had increased by many times my height. Scarecrow and Synoia lay out the critique in more detail.

    I’m not disputing that there are major problems with our health care system. Obviously there are. I just don’t believe that Obamacare fixes any of them in a way that helps the average American.
19. spanishinquisition March 2nd, 2010 at 7:16 pm «

    Just wait until Obama hands AHIP a Captive Market and then rates will really go up! Captive Markets are the gold standard for jacking up prices on customers.
20. cregan March 2nd, 2010 at 7:21 pm «

    This study is like the Yankees doing a study on how good the Red Sox are.

    If the theme and implication of this “study” were true, the profit margin of insurance companies would be astronomical. Of course, they aren’t. That is margin, not dollar amount.

    As in all these “conspiracy” ideas, no one stops to think of how many people work for these companies and how many people would have to keep quiet in not revealing that the companies were out to gouge people only and hiding profits, etc., etc.

    But, it really doesn’t matter. You can tell people that oil companies are not dumping oil in the desert until you are blue in the face, but they don’t believe it. In this case, you can give industry figures showing that the insurance companies and executives make no more than the broad variety of large companies in the world, and it wouldn’t matter. They want free health care and no one and nothing is going to get in the way of that.

    They must punish someone.

    I think the CEO of Apple makes more each year (with stock and bonus), but I don’t see anyone calling for Mac reform or iPod restrictions.

    There are many more factors that go into insurance premiums than just the underlying medical cost inflation. How many healthy people in the pool. An aging population. etc. etc. ALL of those factors would be present in any system.

    This is a study for simpletons.

    And, it certainly shows the medical costs going up and up. And the HCR in Congress does very little to address that.
• cassiodorus March 2nd, 2010 at 7:25 pm «

  I think the CEO of Apple makes more each year (with stock and bonus), but I don’t see anyone calling for Mac reform or iPod restrictions.

  Nobody is left alone to die because they didn’t buy a Mac or iPod.
• marwick March 2nd, 2010 at 7:51 pm «

  It only feels that way.
• cregan March 3rd, 2010 at 7:13 am «

  Medicare has a higher turn down rate for procedures than private insurance companies. So, why aren’t you accusing them of murder??

  Oh, that’s right, it would not help your cause. And certainly, it wouldn’t make “Medicare for All” look so good.

  ANY system is going to have to turn down procedures. NO system can allow anyone to get anything whenever they want.

  Even Canada doesn’t do that.

  So, that argument is really a non-starter.

  More important, this bill is a monstrosity that,even with fixes, no one on either side wants or likes.
• smcclurk March 2nd, 2010 at 7:30 pm «

  Well this is a crappy strawman argument. There are no conspiracy theories being alleged. This is a case against profiteering and price gouging. It doesn’t take millions of people working together to enforce corruption. It only takes a corrupt leadership to enact policies that everyone else follows. You can go back to Aetna or Wellpoint with your nonsense. Don’t try to bring it here.
• cregan March 3rd, 2010 at 7:08 am «

  Here are some great examples of non-sense.

  1. I have a family of 4. My insurance went from about $680 to $950 per month from 2000 until now. That’s an increase of about 33%. A far cry from 97%. That actual real world.

  2. I am with Anthem in California. My increase was $83 a month in the recent change. That is 9%. As we know, Anthem said the 39% was on for a few people in rare circumstance. I asked my agent the what kind of increases others got (independent agent not working for Anthem). Others got similar to mine, about 8 to 11%.

  But, what do you hear about? 39%. Really, it was generally about 10%, but 39% sounds so much better to who want to blame insurance companies. Some would call such misrepresentation a lie, but it is similar to the “study” above.

  Likely, that 39% figure was used to calculate the 97% over the decade. So, it’s a pretty lame “study.”

  From my rates, and according to the rest of the “study,” my premiums pretty much just kept pace with medical service cost inflation.

  So, those are some facts. I don’t expect you will let them get in the way of the Chavez like rush to get it done though.
• Julie717 March 5th, 2010 at 11:33 am «

  “Anthem said the 39% was on for a few people in rare circumstance”…

  It wasn’t just a few isolated people, but for everyone in a specific plan. Ask yourself, how could the cost of one group of insured people go up by anywhere near 39% if the insurance company did not do a completely execrable job of pooling risk? It couldn’t. The company groups higher risk people together deliberately, then uses that risk to justify rate increases which are really intended to purge that group.

  For the insurance company to continue increasing profits, it must continue to do this with ever-less-risky groups of insured people, year after year. The question here is whether we want that to continue, or not.
21. sschonberg March 2nd, 2010 at 7:39 pm «

    If Obama and Congress can’t agree on a public option to stop the corporate health insurance thieves, get the states to vote for a constitutional amendment that mandates public financing of federal election campaigns.
22. captjjyossarian March 2nd, 2010 at 8:32 pm «

    This healthcare bill is going to have to do an absolute ton of cost squeezing to be viable. It has to squeeze out a lot more than just the health insurance industry fat.

    The bottom two thirds of our country doesn’t see real wage growth. So any cost increases beyond inflation are effectively wage cuts.
23. researcher March 2nd, 2010 at 10:16 pm «

    they own congress, white house and supreme court

    they can do anything they want

    the demos are not spineless they are liars.

    they pretend to represent the voters

    they will blame the repubs for their inability to pass health care reform

    any nation that spends most of its treasure on its war machine year after year and not on social benefits is an immoral country.

    the media will not tell you this they are owned by corp america with their ads.

    we are an immoral society to the core.

    and as they say on the farm the chickens are coming home to roost.

    ie bankruptcy of a nation.

    follow the money then you will know who the demos really represent with their lies.
24. Jason Rosenbaum March 3rd, 2010 at 7:18 am «

    Likely, that 39% figure was used to calculate the 97% over the decade. So, it’s a pretty lame “study.”

    Nope. We used Kaiser data which takes into account all insurance plans.