The issue…isn’t the profits that insurers make. It’s the actions insurers take to maximize those profits….The quickest, surest way for insurers to boost profits is to avoid spending a lot of money on sick people. And, particularly in the individual insurance market, insurers can do that in any number of ways. They can charge sick people higher premiums, deny them coverage altogether, or — failing that — revoke their coverage after they start filing claims….They can make it difficult for the chronically ill to get the care they need, by manipulating benefits and provider networks or making it more difficult to obtain authorization for treatments. And they can always jack up rates on blocks of business that have high expenses.

All of which gets at something I’ve been trying to say for some time.  Industry profit margins of 3% to 5% aren’t the problem.  Administrative costs of 10% to 15% of premiums– i.e., expenditures aimed largely at maintaining the infrastructure needed to do all the things Cohn outlines to ensure profitability — is a big part of the problem.  Cohn continues:

These practices help explain why people with serious medical problems so frequently find insurance inadequate or simply unavailable. But they don’t explain why health care generally is expensive for everybody, even the healthy–and why it’s getting expensive so much more quickly. Those problems are the result of the entire health care sector–doctors, hospitals, device makers, the drug industry–providing too much medical care or charging too high a price for it. The insurance industry likes to point this out and it is right to do so.

Said another way, I can understand when insurers raise premiums — even at double-digit rates — to offset rising costs (sorry Mr. President).  But I can’t justify higher rates simply to support an administrative infrastructure aimed at denying coverage and care to the sick.  Only a highly regulated public-private insurance market or a single-payer system gets at a solution.

House Leaders Looking At A Tried & True Parliamentary Procedure To Pass The Senate Bill. This is far from certain, as we are at least 9-14 days away from any potential votes, but the House Dem Leadership is looking at avoiding an up or down vote on the Senate passed bill from December 24, 2009 when the House debates the as-of-yet unformulated Budget Reconciliation/FixIt bill. The Leadership is looking to use a procedural maneuver that would be part of a self-executing Rule — a process that has been used from time to time in the House by both parties when they have been in the majority. It would work something like this:

*Before the House takes up the Budget Reconciliation/FixIt bill they would have to adopt a Rule governing the debate as is the normal procedure. The Rule would contain a self executing clause that would state that upon adoption of the Rule and then debate and adoption of the Budget Reconciliation bill that the Senate bill/December 24, 2009 would also be considered as adopted.

*The whole package would then go to the Senate for approval. In this manner, assuming Senate approval, the Senate bill/December 24, 2009 and the Budget Reconciliation/FixIt bill would all be sent along to President Obama at the same time. And nervous House Democrats would be assured that the Senate bill would not move to the President by itself without the Budget Reconciliation/FixIt bill alongside; since many House Dems do not trust the Senate to pass the Budget Reconciliation/FixIt bill once the House has already stuck out its political neck and taken the tough vote.

Understand?

On Wednesday, a leading insurance broker laid out in clear terms what many Americans could already guess: the insurers’ monopoly is so strong that they can continue to jack up rates as much as they like – even if it means losing customers – and their profits will continue to soar under the status quo.

…which refers to an article by Sam Stein of The Huffington Post that says…

The market concentration for health insurance is so monopolized in some areas that insurance companies are willing to raise prices and lose customers in an effort to improve their bottom line, a leading insurance broker told Wall Street analysts on Wednesday.

…which is based on a conference call hosted by Goldman Sachs with insurance broker Steve Lewis of Willis.  The only problem is in reading the transcript from the call, I’m not exactly sure that’s what Lewis said.  (I called Lewis for clarification, but didn’t hear back by presstime).  What he did say for sure was the following:

We feel this is the most challenging environment for us and our clients in my 20 years in the business. Not only is price competition down from year ago (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.

What this says to me is that health insurers are coming out of an underwriting downcycle and putting margin improvement (i.e., profits) ahead of membership growth — similar to what happened a decade ago when the health plan market was far less concentrated.  Costs are rising and therefore premiums are rising — and therefore the likelihood is more people will be priced out of the market, face higher costs or suffer reduced benefits.  As Goldman notes:

Two years ago, Lewis and his team were one of the few industry sources pointing (correctly) to aggressive pricing by the carriers in a lead up to severe margin deterioration….Now, Lewis and his team find price discipline has strengthened noticeably.

So the effect is the same, but the cause isn’t as clear-cut as the monopoly argument suggests (an argument that ignores the impact of similar consolidation in the hospital industry).  That’s not to say a top-heavy insurance market isn’t part of the problem.  And as Lewis notes, employers do buy in when Obama and the Democrats “rail at what may be termed oligopolistic behavior of carriers in certain markets.”  But as the Congressional Budget Office said when evaluating the potential impact of a repeal of the health insurance industry’s antitrust exemption:

Enacting the legislation would have no significant effect on the premiums that private insurers would charge for health insurance.

They couldn’t give me a straight answer as to why they keep arbitrarily and massively raising premiums — by as much as 60% in states like Illinois.

Last week he proposed a healthcare plan that was nothing more than, “If you need a doctor, go see a doctor.”

Actually, that’s not a bad proposal.

On one end of the spectrum, there are some who’ve suggested scrapping our system of private insurance and replacing it with a government-run healthcare system.  And though many other countries have such a system, in America it would be neither practical nor realistic.

On the other end of the spectrum, there are those, and this includes most Republicans in Congress, who believe the answer is to loosen regulations on the insurance industry — whether it’s state consumer protections or minimum standards for the kind of insurance they can sell.  The argument is, is that that will somehow lower costs.  I disagree with that approach. 

Compromise — and I’m just guessing here — would be something in between.

Everything there is to say about healthcare has been said and just about everybody has said it.  So now is the time to make a decision.

The Administration successfully parlayed the WellPoint rate hikes in California — increases that in fairness were logical and justified at least to some extent — into a symbol of the need for reform by highlighting the financial burden on small businesses and families trying to afford healthcare coverage (and once again demonizing millionaire health plan executives). 

Now the President has backed opponents of reform into a corner by agreeing to incorporate into his revised healthcare proposal four additional Republican ideas.  These ideas, which Republicans stressed in last week’s bipartisan healthcare summit, include a greater emphasis on combating fraud and waste, alternatives for resolving medical malpractice disputes, increased Medicaid payments to doctors, and the inclusion of HSA plans in insurance exchanges. 

The subtext is that the Administration has compromised (and compromised again), and now it’s the Republicans turn.  Don’t hold your breath.  Republicans have refused to compromise all along, and my guess is they will continue to refuse to compromise.  Their strategy is obstruction. 

Obama, meanwhile, has laid the groundwork for Democrats to push through reform — even if it requires the use of reconciliation — without appearing too bad in the eyes of the public.  When faced with the inevitable conservative cries of outrage, the President can just say, “Hey, we tried to compromise and look what happened.” 

All of which seems like pretty shrewd politics, especially considering that six in 10 Americans already blame Republicans for not compromising enough on healthcare reform.  Of course, winning the U.S. Senate election in Massachusetts would have been a better strategy, but hey, any port in a storm.

The state’s broken regulatory system will continue to drag down financial performance in the individual market until a fair and balanced system is put in place. The current system allows out-of-state for-profit insurers and nonprofit HMOs to reject unhealthier and costlier-to-insure applicants in the individual insurance market. BCBSM accepts all applicants, regardless of their condition or cost.

Overall, however, BCBS-MI reported statutory net income of $12 million in 2009, largely because of investment gains of $242 million. Essentially, BCBS-MI lost a lot of money on its individual and Medigap lines, posted a profit on its other business lines, and was a big winner in its investment portfolio — up 14% — because of rebounding securities markets in 2009. 

For additional color on the company’s financial performance, here’s a video of BCBS-MI vice president of finance Paul Mozak on the 2009 results.