05/14/2010 08:31 am ET | Updated May 25, 2011

Rate Regulation Needed to Restrain Big Insurance Greed

It seems that WellPoint CEO Angela Braly hasn't been happy with British Petroleum (BP) grabbing all the headlines lately as the most reckless, buck-passing, greedy corporation. So she unwisely decided to pick a fight with President Obama, who rightly used his Saturday address to the nation to criticize the insurance industry -- and her company in particular. President Obama attacked the insurance industry's "perverse practice of dropping people's coverage when they get sick" and described Americans as "held hostage to an insurance industry that jacks up premiums and drops coverage as they please".

Health and Human Services Secretary Kathleen Sebelius has also been fighting with Braly and WellPoint and for good reason: like the other big for-profit insurers, they've been making money hand over fist -- at our expense. Their turbo-charged greed is out of control, and their lack of any moral compass is shocking.

Yesterday Heath Care for America Now released a report on insurance industry profits and the facts are stunning: In the worst economy since the Great Depression, the five largest for-profit health insurance companies recorded huge profit gains in the first three months of 2010 compared with a year earlier. WellPoint Inc., UnitedHealth Group Inc., Aetna Inc., Humana Inc. and Cigna Corp. reported combined net income of $3.2 billion, a 31 percent leap from the same period in 2009. Together they had already set a full-year profit record in 2009.

So how do they do it? They put profits for Wall Street and bloated CEO salaries above all else. It's called greed and they're good at it.

HCAN's report shows that the top five insurers made record profits by covering fewer people, offering worse benefits, providing less care and charging consumers and employers more in the process. It is an obscene business model: they sell people a product, make it worse but more expensive over time, and then deny people the service they've paid for when they need it.

So while their profits went up, their combined commercial enrollment fell by a staggering 2.8 million people since 2008. And they spent less on health care and more on profits and excessive CEO pay.

In 1993, the leading health insurers spent about 95 cents of every premium dollar on health care. Today, insurers have cut spending on actual medical care to around 81 percent. For the five largest health insurers, the difference between 81 and 95 percent of premiums in 2009 equaled about $25 billion.

This adds up to skyrocketing premiums that America's families and businesses can't afford.
But back to Braly and WellPoint Inc.

In February, WellPoint subsidiary Anthem Blue Cross announced plans to jack up rates by as much as 39% in California. On February 24, Braly testified before the House Subcommittee on Oversight and Investigations to defend the proposed increases, saying they were justified by rising medical costs.

To say Braly was casual with the truth is generous. In fact, from 2000 to 2008, family premiums for the big insurers grew twice as fast as medical inflation, five times faster than general inflation and three times faster than wages.

And then, as we have all recently learned, it got worse; an independent auditor hired by the state showed that WellPoint's rate request was based on faulty numbers and should be drastically lower. Maybe WellPoint had bad intentions, or maybe they're just bad at math. Either way, the rate hike request was outrageous, unjustified and bad for consumers.

During this same period, the Reuters news service reported that WellPoint was engaged in one of the most unconscionable and reprehensible business practices imaginable. WellPoint was systematically targeting women with breast cancer to find ways to cancel their insurance when they needed it the most.

Not many people knew what an "algorithm" was before the Reuters investigation. I sure didn't. In this case, it's WellPoint's grotesque mathematical equation used by a computer to find ways to drop customers (such as women diagnosed with breast cancer) after they get sick. As a result, women are left to fight both cancer and WellPoint. This is appalling corporate behavior. Even by the standards of people who believe it's okay to do just about anything to make money, WellPoint went too far.

Because of the cooked California numbers, on April 28 HCAN urged all states that allow WellPoint to sell policies to study whether other rate hikes were based on faulty numbers. In a letter to governors and insurance commissioners, Health and Human Services Secretary Sebelius wrote that states lacking the authority to reject rate hikes should pass laws enabling them to do so. The Health Insurance Rate Authority Act of 2010, sponsored by Senator Dianne Feinstein and Representative Jan Schakowsky, is the logical next step.

The new health care reform law will guarantee health security for all Americans, end the worst insurance company abuses, and hold insurance companies accountable in a number of unprecedented ways. The Health Insurance Rate Authority Act of 2010 will build on the protections in the new law. It will give federal and state governments authority to review and reject unjustified rate increases. And it will stop Big Insurance from exploiting differences in state laws and taking advantage of the people who live in the 26 states lacking authority to reject or modify requested premium hikes.

Yesterday Health Care for America Now sent an e-mail asking our activists to call their Member of Congress and urge support for the Health Insurance Rate Authority Act of 2010 to make health care more affordable for businesses and families. In addition to calling Congress, feel free to call Angela Braly and let her know you're disgusted by her company's behavior and her misguided defense of it. Her number at WellPoint's headquarters is (317) 287-6000.

Cross posted at the NOW! blog