The Insurance Industry's Lethal Bottom Line -- and a Solution From Sens. Franken and Rockefeller

I'm 46 years old and have been a lifelong democrat, but the fiasco that has taken place on the health care reform front has been a travesty ! The dems are weak at best and are so worried about their re-election that they forget who gave them their power...THE PEOPLE!! The republicans are'nt much better with their lies and deceitful ways to stop change at any cost. I for one am sick and tired of these politicians doing whatever they please to suit their needs and the needs of their true constituents...WALL STREET !!! I call on anyone that reads this to turn over ANY INCUMBENT in their state that has been their for more than two terms !! We need term limits on these people. It's time for term limits. No more of these people staying in their for a lifetime and doing the bidding of big business and wall street. I call for a national referendum to let the people decide on term limits. My guess is that if we did have that referendum, the people would say TERM LIMITS !!!

I wish Al was my man in Minnesota. But I live in a state where some Dems have no iota. Of how disgusting it can be, if those without insurance see, an insurance company sports arena. While they're dying of illness because the insurer said "See ya!". But Republicans don't care-you're just a customer of a mortician. While they collect the benefits of the stocks of the insurance company riches.

I wish Al was my man in Minnesota. But I live in a state where some Dems have no iota. Of how disgusting it can be, if those without insurance see, an insurance company sports arena. While they're dying of illness because the insurer said "See ya!". But Republicans don't care-you're just a customer of a mortician. While they collect the benefits of the stocks of the insurance company riches.

To grok the scope of the health catastrophe in this country, consider the recent Pearl Harbor Memorial. 152 Pearl Harbors of Americans have perished since 9-11 -- people who would have lived if they'd had health coverage. Or had lived in Canada or England or France.

Every single day we delay, another 10 Fort Hoods of Americans needlessly die. ( http://tinyurl.com/l7cy8u ) Be shamed and shocked. This is an emergency. 365,000 needlessly dead Americans since 9-11. Grok the perspective of how hellish the toll of our blindness, deafness is. No billowing smoke, no explosions, no sinister perps. So we just let these people die and die? So Aetna's Ron Williams can make $97,000 a day?

The Medical Industrial Complex has catastrophically failed. And yet we cower and kowtow? I am ashamed. What is the depth of debt in grief from the ruined families that we're incurring as a nation? 1708 more will be dead by December 25. Merry Christmas?

I am sickened by the Democrats' (my people) cowardice. Use reconciliation to do the Public Option and do the rest separately. With no public option, it's just a fancy &/or convoluted way to give massive money to the bloodsucking Insurance Corporations. 14,000 more dead by Easter. Do unto others.

I take issue with none of the factual points in your article. But has anyone looked at the "EOB" sent by your insurance company; the document which lists your recent claims, the amount the doctor nominally charges, the amount the insurer paid, and your copay (if any)? The long and short of it is that the insurers' clout of having a large piece of the doctors' business gives them the power to negotiate a much lower rate than the individual (you or I) would pay on your own; at a savings which greatly outweighs the additional overhead the insurers charge.

For example: my most recent doctor's office visit. The doctor's nominal charge for a visit: $265. My insurer's negotiated payment in full: $150 (including my copay). So, if the insurer has an 80% medical loss ratio as described in the article, that $150 represents 80% of my total insurance premiums relating to this visit; making my total cost related to this visit $187.50 paid to my insurer, a $77.50 savings over the $265 I would have had to pay directly to the doctor had I made the same visit without insurance.

To look at it another way; had the insurance company a medical loss ratio of 90%, as would be required in the legislation discussed, but paid the doctor's nominal $265, my total costs would have been $294.44, $106.94 more than they actually were with an 80% loss ratio. Please, I can't afford that much "consumer protection". And with a limit set on how low the medical loss ratio could be, the insurer would have no incentive to negotiate lower rates with doctors to pass on to the public; quite the opposite, since their net income would be limited to 11% of the payments to doctors, be they high or low. Of course, this is no mathematical coincidence; if the savings negotiated by an insurer did not outweigh their additional overhead, there would be no financial reason to buy the insurance in the first place. In this light, medical loss ratio is seen as an obvious red herring for the consumer, as it does not reflect this savings.

It's possible to argue, as some do, that it's wrong for insurers to use their clout to demand lower rates from doctors. But by the same token, it's just as wrong for doctors to use their power to demand higher rates from individuals, who don't have the clout to bargain. For all their consternation, few if any doctors truly suffer financially as a result of insurance's reduced payment rates, by any realistic objective standards.

American doctors make quite a bit more money than Canadian doctors, for instance; not only in absolute dollars, but relative to average national income, average national industrial wage, etc. (at no loss in quality of medical treatment). So it would seem that the difference in total medical costs per capita between the two countries is hardly due to the lower medical loss ratio of private insurers (relative to the Canadian provincial health plans) adding an unnecessary amount to the cost of the actual medical treatments. Ironically, were insurers to negotiate rates of payments to doctors comparable to those customary in Canada, even if their overhead, administrative expenses, salaries, profits, etc. were unchanged their medical loss ratios would then in fact drop to unheard of lows rather than rise; meanwhile the total per capita health care costs of the American public, insurance overhead included, would be nearly cut in half. That would hardly be called an objectionable outcome.

So, despite the accuracy of the facts reported in this article, it falls short of obeying a critical rule: follow the money. All of it. Then do the math, all of it; make sure the 25 cent savings you've discovered doesn't end up costing you a dollar.

A Government run emergency adjudication board would be put into place that would have vast powers to act on a "stat" basis to reverse unjustified claims denials or delays and the yanking of coverage for the very sick. In addition, if the percentage of board overrides in a given period for a company reaches a certain level, a "trigger" would be pulled in which the Government would be allowed to petition the courts to have the offending company placed into receivership with the risk of investor equity being wiped out. With this threat in mind, the nature of investor pressure on company management would be quickly be changed!

The state insurance regulatory bodies have been asleep at the switch with respect to banning last minute yanking of coverage. There is a model that can be used for crafting this ban. With life insurance, in all states except for one, there is a two-year (one in the one state) in which insurance company can yank a policy if there is material error or omission on the application. After the constestability period has passed, the policy cannot be yank except in the case of proven serious fraud. The same model could be used with individual health insurance. in which the policy cannot be canceled after the constestability period. It was the association of state insurance regulators that devised the alphabet collection of standardized Medicare supplement insurance products, which did much to clean up the sorry state of that business then. Why can't the same be done with health insurance?

I think you've gone a long way toward redemption from the work you did against the public interest as PR exec for CIGNA.
It is remarkable how, even with a public who are much more educated about this issue than they were in the past, and even with films like Michael Moore's Sicko, and even with an ex-insider such as yourself testifying to congress just how corrupt and murderous the system has become, the forces of greed and corruption still hold sway over our political process.
I fear that, unless all political campaigns are publicly funded, we will continue to rush headlong into corporate serfdom.
Thanks for the work you've done this year. For what it's worth, I can't think of what else you COULD have done... the end result was predetermined.
By the way, I would say that your assertion that Obama was outwitted by the industry is not really accurate; he has been shilling for PhRMA & AHIP from the moment he was inaugurated. Glenn Greenwald's perceptive Dec. 16 article at Salon illustrates the true White House stance toward the "stakeholders" (campaigndonors):

Democrat=Republican<=Corporatist

They are OWNED by the Big Banks and Big Business (both Globalized to the point they have no national allegiance).

Democrat voters have been duped as much as Republicans.

Single Payor should be our goal but the Corporatists won't let us get there.

I recently resigned from my independent "consulting" job as a medical consultant performing UR (utilization review) for a very large insurance company. My task was to decide if a medical diagnostic and or treatment request should be prospectively approved, denied, or modified based on the claim history and the use of clinical guidelines.

It became clear to me that my role (and that of my peers was not so independent) and too many of those who made these decisions without ever seeing the claimant used these guides as they were mandates and or standards of care. These decisions were then dictating care not delivered. This process and a statement from my "superior" re: the "% of my approvals" after more than 6 years led to my decision to resign and attempt to blow the whistle.

With health care reform, "evidence based medicine" in the form of guidelines will be used as a manner to decide what should be considered "medically necessary" and may be used in their literal "black and white" language, rather than as a "guide" and in consideration of the individual case in it's totality in context.

The 2009 ARRA has appropriated $1.2B from the DHHS to arrive at "comparative effectiveness research" which will produce more these guidelines for future use( i.e., recall mammogram controversy) when deciding what medical testing and care is "necessary"......

Too often, these guides are not applicable to the case based on the many variables these guides do not take into account. Thus, a provider and their patient need to make an informed and consented upon decision after reviewing these guides in context to the specific case.

It's important that any legislation includes the appropriate use of any guides and should never be used solely as a means to deny care of any type.

I greatly admire Mr. Potter for his guts in coming forward, and for his contribution to returning the health care debate to some level of sanity.

I do have a comment about his statement on MSNBC to the effect that it can be hard to get good numbers on medical loss ratios and the ability of insurers to fudge the numbers with accounting tricks. They may certainly try to do that, but if Congress enacts proper standards, it should be possible for even the most naive regulator to find the correct number.

I was able to get a back-of-the-envelope number simply by using publicly available Census Bureau tables. Although the data available to me was out of date -- from 2006 -- I was able to confirm the general belief that MLR averages 80% or less.

In 2006, according to the Census Bureau, total personal income was a little under eleven trillion dollars. After taxes, they had $9.63 trillion to spend. During the same year, total national expenditures on health care were 2.11 trillion dollars -- an amazing 22% of net personal income.

Now, although $2.11 trillion was spent on health care, only $1.97 trillion was spent on actual health care goods and services. The difference, about 140 billion dollars, is presumably the “net cost” incurred by non-health care providers (i.e., insurance companies, HMOs and similar gatekeepers). That figure includes any income not directly spent for health care, such as advertising, marketing, sales commissions, premium taxes, additions to reserves, and profit.

In 2006, $723.4 billion was spent on health insurance premiums. Deducting the $140 billion leaves $583.4 billion spent on health care providers, which works out to a loss ratio of 80.6 percent. Since the providers spent some of that money on their own advertising and marketing, and their profits, the actual amount spent on direct health care is probably quite a bit less. If the providers spent 90% of their income on health care, that would result in a real MLR of 72.5%.

I was a math major in college, but I'm a lawyer, not a statistician. The lesson is that if I could derive these numbers in half an hour using public information, regulators getting detailed figures from each company could easily do a more accurate job. The key is not to add, but to subtract!

Wendell:
You are in a unique position and I get the feeling you are treading on egg shells. There is more you can do and I believe you have more insight to share.

At the very least you could find out times and places for "Health Fairs" around the country that lead to your epiphany about health insurance and place this information on your blog for all people that might need this information. That would be a big help to us that do not have health insurance.

Thanks for what you can do.

Merry Christmas and Happy New Year!

The pressure to make exorbitant profits is resulting in long, expensive and sometimes fruitless fights for individual insurance policy holders. I'm in the process of fighting Blue Cross Blue Shield of Arizona to cover my c-section to deliver my daughter in August of 2010. Due to a change in the BCBSAZ defined "complications of pregnancy" as of October 1, 2008 my cesarean section isn't being covered because BCBSAZ no longer considers "fetal distress" as a complication of pregnancy.

Something has to be done to insure that patients and their health care providers can make the best health care decisions and not worry about financial ruin due to insurance policy technicalities.

You can read more about Lily's story online at www.lilysmom.com