Guaranteed Healthcare

The American Association of Health Plans (AHIP) is the national trade
group for some 1,300 private health insurers, which collectively
provide some kind of coverage for more than 200 million Americans. As
the voice of industry, AHIP’s web site boldly describes its goals “to
provide a unified voice for the health care financing industry, to
expand access to high quality, cost effective health care to all
Americans, and to ensure Americans’ financial security through robust
insurance markets, product flexibility and innovation, and an abundance
of consumer choice.” This post examines how successful the industry has
been in one of these goals --- the cost and affordability of coverage.

The industry is failing miserably in keeping the costs of coverage affordable.
Consider:

• The average annual premium for a family of four is now more than $12,000;
• Premiums grew four times faster than inflation, outstripping wage
  growth, and increasing 87 percent between 2000 and 2006 (graphic);
• This explosive growth has been going on for most of the last 20 years.
• If this continues, as we saw in the first posting, premiums are projected
  to consume almost one-third of average family income by 2010 and ALL of
  it by 2025, clearly an impossibility well before that time.

Since almost one-half of Americans earn less than $30,000 a year, the
cost of insurance premiums, much less health care itself, are
unaffordable for a large part of the population. Health care expenses
that are more than 10 percent of annual income are generally considered
high; for lower-income adults below 200 percent of federal poverty
level ($41,300 for a family of four in 2007), more than 5 percent is
high. No wonder, then, that 47 million Americans are uninsured, and
that tens of million more are underinsured with scanty ‘coverage’. With
near stagnant income and average household debt more than $100,000,
health insurance for many is out of the question. For those workers who
lose their employer-based coverage, only one in four can afford to
regain their coverage under COBRA.

The gap between the rhetorical goal of low cost and price gouging is
easy to understand: most insurers are investor owned and put their
shareholders first. Insurers refer to the service they provide to their
enrollees as a “medical loss ratio”(MLR), a term that shows how much
they lose by financing care for patients against how much they make.
Seeing care as a “loss” to investors, they try to drive MLR’s down as
far as possible, preferably spending no more than 80% of premium
revenue on care. As a blatant example of unrestrained corporate greed,
share values of United Health, the country’s second largest health
insurer, increased by more than 50-fold over the 17 year tenure of its
CEO, William McGuire, until he was forced out in 2006 in a stock
options backdating scandal after receiving more than $1.6 billion in
compensation.

In sum, lack of affordability has become the Achilles heel of the
health insurance industry. The theft of money in skyrocketing premiums,
cloaked behind the guise of trying to provide “affordable” care, will
lead us to look at the other “goals” on the AHIP website. In our next
post, we will consider what kind of impact the industry has had on
access to health care.

Adapted from Do Not Resuscitate: Why the Health Insurance Industry Is
Dying, and How We Must Replace It, forthcoming, August 2008 by John
Geyman. With permission of the Publisher, Common Courage Press.

Order link http://commoncouragepress.com/index.cfm?action=book&bookid=396