BC of California loses 68% of premiums to health care
Health Plan Costs Come Under Fire
At a hearing in L.A., Garamendi grills insurance company executives about why premiums have soared 60% in four years.
By Lisa Girion
Los Angeles Times
December 2, 2005
(California Insurance Commissioner John) Garamendi singled out Blue Cross of California for criticism, noting that its profit margins on certain insurance plans rose from about 15% to 24% in recent years. The company’s trend on healthcare spending, he noted, was just the opposite - declining from 80% of premiums in 2000 to 68% last year.
“It’s unconscionable,” Garamendi said.
… some of the company’s fastest growing - and most profitable - plans are new ones that offer low premiums in exchange for high deductibles or limited benefits.
The most controversial among them is a plan called Tonik. Aimed at young adults who are generally healthy, Tonik does not cover maternity benefits. Garamendi said such plans amounted to “cherry-picking,” or orienting coverage to attract healthy members, who are cheaper to underwrite.
“They are looking to find individuals that do not get sick,” Garamendi said in an interview. The plans “are all designed to appeal to people who don’t need medical services. That increases their bottom-line profit.”
Officials with Blue Cross parent WellPoint Inc. denied the charge. Tonik is designed to serve young people who might otherwise have no insurance at all, they said.
Blue Cross regional Vice President Ann-Louise Kuhns told Garamendi at the hearing that Tonik and some of the other new plans were aimed at people who hadn’t previously bought health insurance because they couldn’t afford it or viewed it as too expensive.
The plans’ popularity, Kuhns said, showed that they were meeting a need. “If we were offering a product that people didn’t like, they don’t have to buy it,” she said.
http://www.latimes.com/business/la-fi-profits2dec02,1,630081.story?coll=la-headlines-business
Comment: This is great news for Wall Street. The best insurance stock investments are in those companies that have the lowest medical loss ratios - the companies that spend the lowest percentage of their premium income on health care services for their beneficiaries. The medical loss ratio for for-profit Blue Cross of California, a major subsidiary of WellPoint Inc., is only 68%. They keep one-third of the premium dollar!
Blue Cross of California has been an innovative leader in setting health insurance trends throughout the nation. For those who still believe that private health plans must be a major player in any future model of health care reform, just imagine what it would be like if Blue Cross’ innovations were to dominate the scene. In 2006, we’ll be spending $2 trillion on health care. Under these latest Blue Cross policies, insurers would keep $640 billion of that.
So you say that we would never allow that. But what are we allowing now? We are permitting Blue Cross of California to use nefarious chicanery to segregate out the most healthy sector of our society and sell them a profoundly inadequate product that merely masquerades as health insurance. Again, those of you who have believed that we should keep this industry in charge of health care spending should realize that it’s now time for an epiphany.
We will never get it right until we agree that we need a universal, publicly-funded and publicly-administered national health insurance program. The plundering pirates of the insurance industry will never do it right for us.