Cap the profits of health care insurers.

December 13, 2009 | By | 3 Replies More

Former CIGNA executive Wendell Potter reports that in the early 1990s health insurance companies devoted more than 95% of every premium dollar to paying doctors and hospitals to reimburse them for health care provided to insurers. Things have changed:

Today, insurers only pay about 81 cents of each premium dollar on actual medical care. The rest is consumed by rising profits, grotesque executive salaries, huge administrative expenses, the cost of weeding out people with pre-existing conditions and claims review designed to wear out patients with denials and disapprovals of the care they need the most.

They keep profits high by creatively denying claims, canceling individual policies when insureds get sick, kicking unprofitable insureds out of the insurance pool, and issuing confusing benefit statements to insureds.

Potter, with the support of Senator Al Franken, makes the case that Congress should pass legislation requiring health insurers to pay at least 90% of the premiums for real health care. According to Potter, the difference between 81% and 95% is $112 billion a year, which would amount to a significant reduction in premiums or a significant improvement in coverage.

Wendell Potter is a voice we can trust when it comes to health care reform. A few months ago, I posted regarding his lengthy interview with Bill Moyers.

See, also, Potter’s recent interview at MSNBC, indicating that the health care industry owns the U.S. Senate. Potter makes clear that there is no reform taking place with current “reform” legislation.

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Category: Health Care Reform

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (3)

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  1. Niklaus Pfirsig says:

    Several pages of the House healthcare reform bill attempted to address profiteering in the health insurance industry.

    The approach however did not specifically cap incomes, but addressed many of the anticonsumer practices including twisting, benefits caps, denial based on pre-existing conditions, and dumping less profitable patient into medicaid/medicare programs.

  2. Jay Fraz says:

    The 81 cents that insurance companies spend on service is dishonest. That 81 cents includes company profits, just not shareholder profits. It is a quick slight of hand to make the number not be the 60 centish that it really is.

  3. Niklaus Pfirsig says:

    Good point Jay.

    One really sneaky bit of misrepresentation by the health insurers is that those multimillion dollar compensation packages and bonuses are booked as payroll expenses which subtract from the corporation profit margin.

    so a company that has 300 million in revenues pays out 27 percent of that to it top 500 executives can claim a measly 3 percent profit margin after expenses.

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