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Health insurers dancing jig after reform

Insurers are taking a ton of money out of America’s health care system and are well positioned to take even more under reform.

According to publicly available income statements, the top five health insurance companies (UnitedHealth Group, Wellpoint, Cigna, Aetna, Humana) posted collectively a net income of $12.1 billion in 2009.

Of these, UnitedHealth Group and Wellpoint (formerly Blue Cross of California turned for-profit in 1992) reported $3.82 billion and $4.74 billion in profits, respectively.

To put these numbers in context, in this same period John Deer posted net income of $.87 billion, Target $2.4 billion and the Ford Motor Company $2.7 billion.

On March 23rd health care reform became law. Before passage and since health insurance companies have wailed doomsday from the reform’s cost cutting measures, citing statistics of rising physician fees, the aging population, and the looming bugbear of required coverage of preexisting health conditions.

Savvy investors, however, guided by Wall Street analysts and a slew of market indicators knew better.

Their North Star statistic was thirty two million additional beneficiaries paying into insurance companies’ pockets. From January 2010 to present, all five top insurance companies have seen investors push their stock prices up – not down.

Still, insurance companies publicly fret reform limits to 20 percent of every premium dollar, the amount that may be applied to administrative overhead costs, down from 26 percent on average today.

Insurers are already gaming this provision by reclassifying many administrative services so that they fall onto the medical side of the ledger.

A U.S. Senate report in April chided Wellpoint alone for reclassifying more than half a billion in services from administrative to medical.

Insurers stand to profit the most under reform from more rural communities where access to health services is limited.

Under the individual mandate provision, everyone must pay monthly premiums to insurers whether they receive medical care or not. It is only when services are rendered and medical claims are paid out that insurers’ profitability goes down.

Southern Ohio promises to be a cash cow for insurers.

In a previous article I noted the more rural communities in Lawrence, Jackson, Piketon, Adams, Brown and Clermont counties are already experiencing a significant lack of health care providers. (Joe Green, “Health Care ‘fix” will impact southern Ohio,” Tribune, March 26, 2010).

Southern Ohioans know how difficult it can be to access primary care services, and even harder to receive specialty care such as orthopedic back specialists or cardiologists.

To make matters worse, reform is projected to cause a significant spike in demand for health services in our region. U.S. Census Bureau figures indicate approximately 46,000 people will be newly insured in Southern Ohio.

Monies will flow monthly out of rural communities like a river of gold to the distant corporate headquarters of insurance companies.

Southern Ohio needs to take proactive action now to retain more health dollars at home. We should look to establish a regional health insurance company that will collect premium dollars (private, state and federal) and pay local providers with objectives of increasing access to care and reinvesting those dollars in our communities.

On a state and national level, we should work with our representatives to eliminate annual open enrollment for insurance coverage which tends to trap people in less than par service and enable insurers to reap untold profits.

In its place, we should adopt a policy of open enrollment 365 days a year with minimal switching costs. This market dynamic will create tremendous pressure on insurers to retain market share by lowering costs and raising the level of service.

Joe Green is from Piketon, Ohio, and may be contacted directly at www.joegreen.us