Incoming Federal Insurance Office director Michael T. McRaith sat down with Kaiser Health News last month to discuss how insurers are using the interim period between passage of the Affordable Care Act and when most of the insurance regulations are enacted in 2014 to increase profits and force the sickest (and costliest) beneficiaries off their rolls:
In this transition period to 2014, insurers are increasingly aggressive with their underwriting, meaning they are increasingly aggressive in denying coverage, limiting coverage or denying or limiting any one claim.
They are using the absence of rate regulation to price out existing policyholders. That is designed to lead to the accumulation of capital, so that by 2014, when insurers have to cover everyone, they’ll be starting from a point of extreme financial strength. [...]
Q: Are you hearing anecdotal stories from consumers?
We sure are. People in the pre-Medicare age have a lot of trouble receiving individual and family coverage. Historically someone in that group would receive an offer of coverage with exclusions. Now we’re finding that person is not receiving an offer.
We’re also hearing from small employers whose premiums are increasing 30 percent to 40 percent. In one case a small business of personal trainers, where the average age was 31 — five of them in a high-deductible plan, and no one in the group met the high deductible — their premiums were increased by 35 percent.
It’s hard to see what the Affordable Care Act does about all of this and it only goes to show that Congress will need to pass additional legislation to control health care premiums (Sen. Dianne Feinstein (D-CA) has a bill that could help do just that). Insurers, meanwhile, attribute the rising premiums to the relatively small costs of the initial benefits of reform, even as they continue to spend more of the premium dollar on profits. A sampling of yesterday’s headlines demonstrates just how well they’re doing:
- HUMANA: “Humana’s shares jumped as much as 7 percent after the company said on Tuesday that first-quarter earnings would be well above its previous forecast, raised its full-year profit outlook and increased its stock buyback plans.”
- BC/BS of Delaware: “As Blue Cross Blue Shield of Delaware pursues a merger it says is necessary to afford capital improvements, it has socked away almost three times more money in reserves than is required by its national association to guard against unexpected events. And its $173 million in reserves are 10 times what state regulators require.”
The point on large reserves is also worth highlighting. Insurers typically try to minimize their profits by arguing that they only make up 4 percent of national health expenditures, but the BC/BS example demonstrates that they have a certain level of discretion in how much they can stow away in a reserve, thereby lowering their “official” earnings. This, by the way, is the industry that Paul Ryan thinks should be in charge of providing health care to our seniors.