About Careers MedBlog Contact us

Executives Make Merry While Citizens Struggle With Premiums

by Gopalan on August 12, 2010 at 8:21 AM
Font : A-A+

 Executives Make Merry While Citizens Struggle With Premiums

Health Care for America Now, a coalition of advocacy groups, has lashed out at the top executives of the nation's five largest for-profit health insurance companies for extracting nearly $200 million in compensation last year — thus at a time when middle classes struggled with skyrocketing health insurance costs and the worst economy since the Great Depression.

The CEOs of UnitedHealth Group, WellPoint, Aetna, CIGNA, Humana, Coventry Health Care, Health Net, Amerigroup, Centene and Universal American took $944.1 million in compensation from 2000 through 2009, according to the report, entitled "Breaking the Bank."

The jaw-dropping compensation for 2009 set new standards for the industry and for what CEOs will pay themselves in the future. Last year's compensation for health-insurance CEOs was enormous, enough to fund stress tests to check the heart health of up to 776,000 patients, or to pay for every resident of Philadelphia, Dallas and Minneapolis combined (3.2 million people) to go to their regular doctor for an office visit. Over the full decade covered in the report, average CEO pay has reached nearly $10 million a year per company.


"The insurance companies are driven by perverse incentives that reward CEOs for imposing devastating rate hikes on families and businesses while denying care to people when they need it most," said HCAN Executive Director Ethan Rome.  "It's indefensible that CEOs in America are profiting by gouging customers in such a shameless way."

Each year, health insurance companies charge their customers higher premiums and provide more restrictive coverage. Insurers blame the hikes on rising costs charged by health care providers, but the facts say otherwise. Meanwhile, health insurers set new profit records (the five largest for-profit health insurers reported net earnings of $12.2 billion in 2009) while compensating their top executives with exorbitant salaries and stock options.

The report went on to charge that insurers were mounting  a calculated assault on the new healthcare rules too - even before they took effect.
State and federal insurance regulators are currently considering guidelines to induce health plans to spend a greater share of their premium revenue on patient care and less on executive compensation, administration and profit. The proposal revolves around a closely-watched financial indicator known to Wall Street investors as the medical-loss ratio (MLR). The new health reform law includes a provision that requires insurers to spend on patient care at least 80 percent of health plan premiums collected from individuals and small employers and 85 percent of premiums paid by large employers.

Crucial recommendations on implementation of these guidelines will be made soon to the U.S. Health and Human Services Department by the National Association of Insurance Commissioners. Most of the plans reviewed in the HCAN report continued in the second quarter of 2010 to spend lavishly on non-medical activities while reducing the share of premium dollars used for members' actual health care.

The health insurance industry wants to expand the definition of allowable medical expenses to include costs that are not directly related to the delivery of care and have not historically been classified as medical. Instead of reducing costs and improving the efficiency of their operations, they simply want to change how certain expenses are classified. This approach would encourage CEOs to gouge consumers even more than they already do in order to jack up corporate profits and share prices, thereby increasing bonuses and grants of stock and stock options to them. That would augment the value of their personal holdings as the share of premium dollars spent on medical care continued to shrink. They can do this because they have little competition in 99 percent of metropolitan areas. Limited competition means insurers lack the incentive to drive down costs, while the absence of transparency about their behavior drives costs up.

"The insurance companies and their army of lobbyists are doing everything they can to undermine this law," said Rome. "In order to feed their greed, they are pressuring regulators to change the very definition of what is 'medical care' so they can ignore these important new requirements and trump Congress."

In addition to stifling the impact of the historic health reform law, health insurance companies want to craft as many exceptions, transitions, and delays as possible to avoid meeting even the weakened standards they seek, the report argues.

Strong standards for insurance company spending are needed to ensure that premiums are not jacked up merely to perpetuate bloated executive compensation. The MLR standards in the Affordable Care Act are critical to curbing the worst of the health insurance industry's consumer abuses, controlling rising premium costs, increasing the value of premiums paid by private and public customers, and reining in the profiteering of health insurance companies. MLR, "medical loss ratio," is the percentage of premium dollars that a health insurer is required to devote to the medical care of its enrollees. 

To enforce the MLR standards and fulfill the promise of quality, affordable health care for all, the U.S. Department of Health and Human Services must reject the insurance industry's sophisticated efforts to undercut the law. If the rules governing medical-loss ratios, rate review and other consumer protections are implemented as intended, the health reform law will hold accountable an industry that abuses millions of customers when they need health benefits the most.

Source: Medindia
This site uses cookies to deliver our services.By using our site, you acknowledge that you have read and understand our Cookie Policy, Privacy Policy, and our Terms of Use  Ok, Got it. Close

Executives Make Merry While Citizens Struggle With Premiums Personalised Printable Document (PDF)

Please complete this form and we'll send you a personalised information that is requested

You may use this for your own reference or forward it to your friends.

Please use the information prudently. If you are not a medical doctor please remember to consult your healthcare provider as this information is not a substitute for professional advice.

Name *

Email Address *

Country *

Areas of Interests