Since I’ve slammed the managed care industry (here) — along with obstructionists on the right (here) — for being disingenuous and/or telling lies about healthcare reform, it’s only fair that I point out when a pro-reform group whose agenda I tend to agree with is slanting the truth. Healthcare for America Now! has issued a report showing that five leading managed care companies (Aetna, Cigna, Humana, UnitedHealth and WellPoint) enjoyed a combined 56% increase in 2009 net profits to $12.2 billion.
‘Tis true, but it’s not the whole story. Several one-time factors artificially boosted 2010 profits for the group. For example, WellPoint sold its pharmacy benefits business in 2009 for a one-time after-tax gain topping $2 billion. UnitedHealth settled a lawsuit in 2008 for a one-time pretax cost of more than $1 billion (which has the effect of lowering 2008 profits and making the 2009 increase appear bigger than it normally would have been). Same for Cigna, which had an after-tax loss of $646 million in 2008 from its discontinued reinsurance business. If you factor out these three one-time items, profits for the five companies would be up about 17% for the year – still a strong gain, but not quite the same as the 56% figure quoted in the report. (Factor in net realized investment losses from imploding securities markets in 2008, and net income at the five companies actually fell in 2009).
Meanwhile, net profit margin — even using the unadjusted total net income figures cited by Healthcare for America Now! – would be about 5% combined in 2009. (Overall, healthcare plans rank an unspectacular 88th in net profit margin compared to other industries, notes Yahoo! Finance, even though aggregate profits and cash flow are impressive). Healthcare for America Now! writes:
The outsize earnings are a vivid reminder that without comprehensive national health care reform the gatekeepers of our broken health insurance system always will put the short-term interests of Wall Street before the needs of millions of patients and a national economy plagued by joblessness.
Ignore the part about the outsized earnings for 2009, and they’re onto something. And remember, just because the other side is intellectually dishonest, that doesn’t mean we have to be.
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An excellent piece and I admire your tenacity in trying to inject some level of rational discuourse into a process which, unfortunately, seems to favor dialectic over dialogue. Of course, that’s not an uncommon fate for a piece of social legislation that isn’t firmly anchored in a single, overriding objective. Add to that the initial unwillingness of the administration to actually use the mandate they won in 2008 and the result is predictable.