Aetna Health to drop 650,000 insured to raise profits – single payer one step closer
A couple of months ago I wrote a piece on True/Slant entitled “The Inevitability of an American Single-Payer Health System” where I argued that single-payer health care in this country was – like it or not – an inescapable result of our current system. I also warned that the conditions that would make this the case would happen sooner than we expect.
I did not, however, anticipate that the dominoes would begin to fall quite this soon.
Today, Aetna, one of the nation’s leading health care insurers, announced that they would raise their premium prices for 2010 to make up for their disappointing profit numbers in 2009. By Aetna’s own admission, they expect the bump to reduce their number of insured members by some 650,000 next year, almost 4% of their total base of customers.
The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.
Via Huffington Post
Aetna reported that they were surprised by the increases in the costs of medical care in calendar year 2009 and had not priced their policies high enough to earn the level of profits they desire.
If you take a moment to read the above-referenced article, you will see that this is precisely what I said would happen in the years to come. When the pressure of the rising costs of medicine collide with the need for increased share value required by Wall Street investors and company management, the private health insurance model, as currently built, will necessarily fail. Today, it’s the poor and lower middle class who cannot afford to buy insurance. However, as rates go up to allow insurance companies to maintain profitability, it is only a matter of time until private insurance is priced out of the market for even the middle class. Who is going to have to step up then? The government, of course.
If anyone is looking for a reason to support a strong public option, Aetna has just provided you with Exhibit A. Unless Joe Lieberman has an answer for where these 650,000 people who are about to be dropped by this one company are going to find a replacement policy, Lieberman, and those who for their own reasons refuse to do what is right for the country, are going to pay a huge price for their treachery.
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Although the cost of medical care does go up every year, spending millions fighting reform couldn’t have been helpful to Aetna’s bottom line either. Fucking criminals!
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Rick,
We have universal health care now – it’s called the emergency room, and it’s the least efficient and most expensive way it could be done. I agreed with your post previously and I agree with you now. As long as we value human life more than gold, then the unscrupulous can hold us hostage by brazenly making us choose. That is what Aetna is telling us -> Your life isn’t worth our profits.
Actually, emergency rooms are increasingly treating people without insurance differently than those who have it, despite a legal obligation to do otherwise. So, even this ‘universal’ approach is disappearing. But, you’re completely right. It is the most expensive and inefficient way to deliver health care
In response to another comment. See in context »Aetna doesn’t seem reticent about it at all. Not even a “gosh, gee, I’m sorry but.” Are they really so greedy that they can’t see what you have so clearly pointed out? Or perhaps Aetna and its like believe there will always be plenty enough of the healthy and willing to give them the profits they crave. That doesn’t seem like a very wise long-term business plan. “Cause one day the healthy will realize their premiums enable a process that sends their own old and infirm family members to their knees begging for mercy. Come to think of it, that reminds me of a “reason” I recently heard for Conservatives not wanting Big Govm’t to take over health care: they believe, I was told, that it is the individual’s responsibility to give alms to the poor and the poor’s responsibility to beg for it. Somehow that will get both into heaven, or at least the Almsgiver, who according to Calvinism, obviously is among the chosen. Ya know, the older I get the more humanity seems like just a bunch of crazy monkeys. My head’s exploding. And I gotta go to work. Good piece, Rick. Thanks.
You can’t be surprised that a profit- making organization is focused on making a profit. I also don’t condemn them for doing so. It’s why they exist. And the way they make a profit, as an insurance company, is to try and get rid of those whom aren’t the best customers for them.
In response to another comment. See in context »They can’t behave in socially beneficial way because their primary obligation is to their shareholders.
This is why government will inevitably have to take over the health care system. It’s just a matter of when.
If I try to follow the logic of profit is “why they exist … they can’t behave in socially beneficial way(s) …” then I have to suppose the Chinese have it right: Put melamine in food so it tests high in protein and keeps cost down; design head- and hand-crushing cribs and strollers cause it’s more profitable to make ‘em that way. And so, the fact that the 600,000 are condemned to some degree of statistical likelihood of death-by-lack-of-healthcare should not surprise me either because it is merely an expression of maximizing profit, a basic tenet of capitalism. And if I am a capitalist, I should realize that there is no honor or dishonor in that. = All I gotta say to that is Yikes Yikes Yikes
In response to another comment. See in context »I see what you’re saying but the example takes it to an extreme. We have laws that protect consumers from being injured by the types of things you reference above. And, if any health care bill gets through, we’ll finally have some laws that make it harder for insurance companies to do things that injure its members (getting rid of pre-existing conditions, etc.) But there is a difference. A society has a responsibility to provide its citizens with decent healthcare and not support a system that leaves people out or makes it unduly hard for others to afford basic care. This is why it is best provided by the government , not private insurance that is obligated to turn a profit. Remember, the health insurance industry did not begin as a profit venture – it began as non-profits pooling to help people when and it they needed medical care.
In response to another comment. See in context »You are just a terrific advocate and writer, Rick. Keep going. I support you wholeheartedly.
In response to another comment. See in context »Rocky
Thanks for the nice words. Much appreciated.
I read the story on Huffington Post and have to agree with you Rick that eventually we will have to move to single payer because the Wall Street profit model of consistent quarterly gains is killing American companies. Not to mention the high cost of providing benefits.
Aetna’s move has got to be the largest PR blunder in their history and perhaps the best ad material available to push single payer. The corporate profit motive has gotten so out of hand that they are in danger of permanently imploding their companies if they don’t start thinking of long term 10, 15 and 25 year strategies.
Having run a public company myself, I can tell you that nobody ever thinks that long term. They all say they do – but they don’t. Management has no reason to. They won’t be there in 10 years nor willl the current shareholders. Public corporations are all about managing to show a 10% increase each year.
In response to another comment. See in context »I don’t object tot these companies having a profit motive. However, it will ultimately become impossible to maintain their margins without blowing up their consumer base. This is what happened with Aetna. This is why I argue that – no matter what side of the ideological fence you may be on – it doesn’t matter. Ultimately, we will have a public system and a private system for those would can afford it….just like in the UK.
Rick,
In response to another comment. See in context »Since you’ve run a public company perhaps you can answer this:
Is Aetna more concerned with profitability (% profits) or gross profits (Number of $ they make)? Is it really the case that they can make more money by raising prices on the N – 650000 “customers” they have left or will they just make a higher percentage profit? If I’m selling shoes, I want to make the most money I can by selling as many shoes as possible, but Aetna seems to have a very different perspective.
MisterB – That depends on how they actually measure profit. Some companies will look at bottom line $’s. Some will use “return on investment” (ROI) or “Return on capital” (ROC) to measure. Just depends on their accounting practices.
@Rick – I agree. There is no long term thought from CEO’s, mainly because you don’t see CEO’s signing long term contracts. 1,2 maybe 3 year deals are about as long as you will see. Plus, CEO’s have been so influenced by media these days, they have figured out that with “rock Star” status, they can make 10x the amount of money they actually make from a company.
Corporate America borders on the ridiculous, at this point. It’s the reason why I got out and went to a small community company.
In response to another comment. See in context »I think the number they look at the most is EBITA. And as long as it is improving by 10% every year, good things tend to happen.
In response to another comment. See in context »I suspect Aetna has done the calculation and it works. Keep in mind that of the 650,000 projected to go, about half are individual policy holders (the least desirable) and half are small business customers. They aren’t touching the larger, group plans which is where the most profit is.