Last Wednesday a Congressional committee grilled Angela Braly the CEO of Wellpoint Health Insurance (Anthem Blue Cross). House member Bart Stupak was upset that Angela was paid a million a year and the Company made 2.7 billion dollars. The fact that it was a 4 percent return on investment, didn’t sink through Representative Stupak’s head. He kept referring to the 2.7 billion dollar profit, being a lot of poor people’s insurance premiums; that was just too much profit for a private insurance company. He thought that a 39 percent increase in premiums was outrageous. As an investor, a 4% return is pretty poor also. Common sense suggests that no company would raise rates 39 percent just to make a profit. Irritating your policy holders doesn't help when it comes to renewals.
In the investment world, a 20 percent return is more of the norm. The question arises why play here if you can make more money elsewhere? The other point to ponder, if there is gobs of money to be made in health care, there would be more competition for those big bucks.
The point that impressed me at this interview was the fact that a private company trying to make a profit, was charging rates that allowed it to survive. To some the rates seemed exorbitant. But that is always the case when you can’t afford the premiums. The private sector has to know all the costs of doing business. Make a wrong estimate and the company is out of business.
Some of the provisions of Obamacare spell the end of health insurance. No limits on claim amounts and no denial for previous conditions, cannot be tolerated in a for profit insurance business model. These values have to be defined. It is grand and noble to want to cover every condition, but as a business model, it cannot survive. As a government model it can survive, governments do not need to make a profit. Can Blue Cross compete against the government model?
The Democrats point to the "unfortunate" 50 million people who are uninsured. Without doing any research, I would guess the group of people from the age of 18 to 40, are the 50 million people without coverage. At their age, they're immortal, why buy health insurance? But with them paying premiums into the system, the insurance companies could offer lower rates to everyone. These young people are not about to buy health insurance, they’ll pay the tax.
Once the government destroys the health insurance industry by eliminating their ability to make a profit, then Obamacare will be free to charge (TAX) whatever they need to kick the can further down the road. The neat thing about this, raising health care rates will be done by a committee not Congress, so it won’t be considered a tax increase. We the people will have no control over it. We will pay for steak and end up getting dog food. Government run programs are a little like public restrooms, they get used and abused.
There is no reason for a company to sell health insurance if they can’t make a reasonable profit. And of course any business where the government tells you what you can or can’t charge for, is one to be avoided, especially if they are the competition. Big government it going to teach private health care insurance a lesson. John Q Public gets to keep their present health insurance until it goes out of business. It’s a little like signing up for a cruise around the world-- it’s when they pass out the oars, that you realize this isn’t quite what you had in mind. Plus the fun part, you won't know the costs of the tour until after the cruise.
Copyright 2012 by Jim Brubaker