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What do we need health insurers for anyway?

February 28, 2010|Michael Hiltzik
  • WellPoint Chief Executive Angela F. Braly, left, and the company's chief actuary, Cynthia Miller, wait to testify at a House subcommittee hearing on the insurer's California rate increases.
WellPoint Chief Executive Angela F. Braly, left, and the company's… (Ann Heisenfelt / Associated…)

Angela Braly can't kid me.

When the chief executive of gargantuan health insurer WellPoint (parent of Blue Cross of California) went before a congressional subcommittee the other day, she displayed all the smile-through-the-tears pluck of Annie looking to a sunny tomorrow or Scarlett swearing to God she'll never be hungry again.

WellPoint didn't really want to jack up health premiums on its customers by as much as 39%, she said -- it had no choice. "We care deeply about our California customers," she said.

But what she was really telling the committee members was this: "Please put us out of our misery."

Braly explained that her company's premium increases on individual policies were based on several circumstances: One, people are getting older. Two, people are becoming unemployed, and if they're healthy they're dropping out of the insurance pool. Three, the cost of diagnostic testing is soaring.

Implicitly, she begged for the government to help -- put people back to work so they're eligible for cheaper group plans, and clamp down on costs. (Not even the government can stop people for growing older.) Without that help, she intimated, premiums are going to keep rising sharply and WellPoint's already meager profits are going to be hammered worse.

In delivering this appeal, Braly was forced to make an implicit admission that her industry almost never makes explicitly: The nation's health coverage system is so hopelessly broken that even the health insurance industry can't handle it anymore.

Her testimony, and other statements she and other WellPoint executives have made, suggests that insurers can't profitably manage through periods of high unemployment. They can't price policies in a way that keeps healthy young people in the same pool as older people, producing a mockery of the very point of indemnity insurance. Despite a decade of unobstructed consolidation, which was sold to regulators as a way to control healthcare costs by creating mega-insurers like hers, her industry can't control healthcare costs.

Braly's words are a reminder of the most important unasked question in the entire healthcare debate: What do we need insurance companies for, anyway?

The only way insurers can remain profitable at all is by selling healthy people on policies that don't offer much coverage at all, while squeezing older, less healthy people remorselessly so they either pay for most of their care out of pocket or get priced out of the insurance market completely (thus becoming a burden for taxpayers).

In short, this is an industry that acts as if it will have trouble making money unless regulators allow it to cover only injuries suffered by a young single male hit by an asteroid.

Meanwhile, however, it fritters premium income away on expenses generated largely by corporate initiatives having nothing to do with healthcare. WellPoint spent $2.6 billion repurchasing its own shares last year. This was such a good deal for shareholders that its board recently authorized spending an additional $3.5 billion for the same purpose. None of those dollars, it should go without saying, will be available for delivering healthcare to customers.

It would have been marvelous and uplifting if all the participants in Thursday’s health reform summit in Washington understood that as well as the insurers themselves.

Instead, the health reform obstructionists, who mostly belong to the Republican Party, mouthed the same tired and irrelevant bromides. They yammered about blocking malpractice lawsuits, even though the evidence shows that malpractice litigation, including the "defensive medicine" it foments, accounts for 2% to 3% of the country’s annual healthcare bill of $1.7 trillion. (Arguably a small price to pay, at that, for the value of giving patients injured by malpractice redress for their injuries.)

They returned again and again to the old chestnut about allowing insurers to sell policies across state lines. President Obama, to his credit, understood that absent minimum coverage standards this would lead insurers to race into whatever benighted states were willing to remove all coverage standards just to compete for, say, WellPoint's headquarters. No one in any state would be able to buy a policy worth a tinker's damn. The reform opponents greeted his explanation like the deaf adder in Psalm 58: They just stopped their ears.

So it's worth scrutinizing Braly's words for a reminder of what really needs to be fixed.

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