Health care consumers across the state are bracing for another round of double-digit health insurance premium increases. Employers large and small are being forced to reduce or eliminate health benefits or ask their workers to pay more for their coverage. Escalating even faster than health-care premiums is the rhetoric and typical blame game being waged by the various parties.
Predictably, HMOs and health insurers are blaming doctors and hospitals for rising costs, and are pointing fingers at consumers for using more services. And they’re brandishing the usual arsenal of "academic" reports from high-paid university professors and researchers to prove that doctors, hospitals and consumers are to blame for rising costs.
What the HMOs fail to mention is that, by and large, they’re reeling in huge profits while the rest of us are forking over more for our coverage. Recent financial earnings reports show a disturbing trend: health plans are spending a shrinking portion of our premium dollars on actual patient care, are making an abundance of money and are still sticking consumers with double-digit premium increases.
In 2002, for example, Health Net reported net income of $228.6 million, up more than 164% from the previous year. In part, Health Net was able to increase its profits by lowering the percentage of premiums it actually spends on patients. Ironically, health insurers label the money they spend on patient care their "medical-loss ratios." Health Net’s medical-loss ratio dropped from 84.4 cents in 2001 to 83 cents on the dollar in 2002. But they’re still asking their private-sector members for premium increases averaging 14%.
WellPoint, parent company for Blue Cross of California, recently boasted 70% growth in income (or profits) for fiscal year 2002. The health plan reported a whopping net income of $703 million in 2002 at about the same time Blue Cross was increasing premiums for California consumers by an average of 10-12%. Blue Cross reports that 18% of its premium dollars go to pay for administration, overhead and profits.
Let me be absolutely clear: I am a complete supporter of private enterprise and believe all businesses are entitled to make money. I’m no advocate of a government-sponsored universal health coverage system. I believe that private businesses and the private market are best equipped to provide services to consumers.
But when more than 7 million Californians lack any health coverage and millions more lack adequate coverage, it’s time to look closely at where health-care dollars are going. There is, after all, a funding shortfall in the system, and the largest impediment to getting health coverage is cost. Businesses, consumers, health insurers and decision makers all have a fundamental obligation to provide the checks and balances that keep our private sector market in line. If the private sector doesn’t act responsibly, you can be sure that the government will come marching in to take over the task or, even worse, take over the responsibility entirely.
All health-care consumers should be asking themselves: Where are my health-care premium dollars going? When health insurers demand premium increases, we should demand that they demonstrate those increases will translate into better access to care and not just bigger profits for their stockholders.
If nothing more, perhaps these rapidly rising health insurance premium increases will heighten consumer awareness and vigilance over their health-care dollars.
Jim Conran is President of Consumers First, a California-based consumer advocacy organization. Conran is former director of the Department of Consumer Affairs under Governor Pete Wilson and the vice president of the California Small Business Association.
