Aetna CEO Mark Bertolini caused quite a stir when he said at a Las Vegas conference a few days ago that the insurance industry as we know it is, for all practical purposes, a dinosaur on the verge of extinction.
Time to sing, "Ding dong the witch is dead"? Not quite, but the day when most Americans get their coverage from what we think of as an insurance company is close at hand. It won't be long before most of us get coverage through either a state or federal government-run plan or a local nonprofit company. The big investor-owned corporations like Aetna and the companies I used to work for, Cigna and Humana, know that the days of making a killing off of basic medical insurance policies are over. And the companies have no one to blame but themselves and a fatally flawed, uniquely American system of providing access to care.
While Bertolini was by no means predicting that Aetna and its competitors were about to close their doors and get the hell out of our lives, he most certainly sounded the death knell for the standard business model insurers have followed for many years -- actually insuring people.
"The system doesn't work. It's broke today," he said. "The end of insurance companies, the way we've run the business in the past, is here."
Bertolini ticked off a number of reasons why providing basic health insurance to Americans was no longer viable -- changes in demographics and the economy and, of course, health care reform at both the state and federal levels. What he did not say was that the standard operating practices of the industry were simply not sustainable and actually contributed more to the demise of the business model than any external factors.
Ever since the health insurance industry came to be dominated in recent years by a handful of big for-profit corporations, insurers have actually been driving away customers and shrinking the universe of people they were willing to cover, because of the return on investment and the profit demands of the large institutional investors that own most of the corporations' shares. It is because of those demands that insurers price their premiums beyond the reach of millions of Americans. It is because of those demands that insurers reject on average a third or more of all applicants because of "preexisting conditions." And it is because of those demands that insurers have routinely canceled the coverage of thousands of policyholders when they got sick. Now you know why more than 50 million of us are uninsured. It is not because most of those people are being irresponsible. Most of them either can't afford to buy coverage or can't buy it at any price.
The number of people who get their coverage through the workplace is also declining because of shareholders' profit demands. As recently as the early 1990s, more than 60 percent of small businesses were able to offer coverage to their employees. Now it's well below 50 percent. Over the past two decades, insurers have methodically "purged" small businesses when an employee or dependent got sick or seriously injured.
Even though the population of the United States increased by more than 27 million during the 2000s, the number of people enrolled in managed care plans declined significantly, according to U.S. Census Bureau data -- from 179.4 million in 2000 to 169.4 million in 2009.
As a former managed-care analyst was quoted as saying in Barron's last October, "There's no organic growth left in this business except for pricing."
Another standard -- but unsustainable -- industry practice is shifting more of the cost of care from insurers to their policyholders, and from employers to their workers, through ever-increasing deductibles. You can't keep making consumers pay more and more for their care and expect them to see the value of buying coverage. My former colleagues in the industry estimated, in private meetings, that the average American family could not afford to pay more than 16 percent of its total household budget for medical insurance and out-of-pocket deductibles.
These unsustainable business practices explain why insurers were so insistent that the Affordable Care Act contain a mandate that every American not eligible for a government program like Medicare or Medicaid be required to buy coverage from a private insurer and that those unable to pay the premiums be given subsidies by the government -- subsidies that would go directly to the insurers.
Bertolini was correct in noting that the Affordable Care Act -- which essentially will ban medical underwriting after 2014 as well as several anti-consumer practices -- has accelerated the timeframe in which the industry's current business model bites the dust. But reform was only an accelerant.
Over the coming weeks, I will be writing about how these companies are evolving and what that means for all of us.
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We, as Americans, need to expect and demand better access to care for everyone.
Wealthy families should not get to see whichever doctors they need for every concern they have, while poor families have to choose between food, rent and health insurance.
We can do better for ALL of us.
We all grieve when we lose someone we love, when we watch those close to us suffer. Money or lack of it doesn't stop us from being human.
I was in the manged healthcare business for most of those years. We used to run models of when the insurance system would kill themselves off by ever increasing costs and restrictive acceptance. We estimated 30 years ago that healthcare costs would not be able to reach 20% of worker income without the system collapsing. I will finally get medical insurance next year whern I turn 65.
• Eliminate government involvement in every way • Create lots of high quality care clinics and small hospitals with private funds and private foundations support, no government money or involvement, except for few and strictly enforced
smart regulations for patient safety • Institutions compete like any other business • Eliminate insurance all together • Form cooperatives and sliding scale fees, get creative and
fundraise to create charity care funds for those with absolute
need • Strict enforcement and required proof ofeach individuals
financial situation • Allow for private medical offices and medical practices with
fixed rates and concierge medical facilities as well for those who wish to use such exclusive services and if those doctors wish to offer discounts and other incentives, fine, let them
You pay in to the system for years and years, and when you need to tap into the system, you find out for whatever reason, maybe for a falsified reason, that the coverage you were banking on is denied.
Many thousands of people who had insurance coverage have dies while appealing their denials.
It is a horrifying scam.
Great Work Mr. Potter.
Second, I have YET to hear any — ANY — so-called "free-marketer" DO THE MATH supporting private, for-profit health insurance.
Like fire and police protection, health care is the essence of a "public interest" service. The notion of surrendering health care insurance to private corporations, GUARANTEEING higher costs to the insured, is as preposterous as would be surrendering the first two.
Single-payer is usually met with distracting bleats about instances of fraud and abuse, but the idea of ADDRESSING those problems always takes a back seat to screeds about the "free market". The staggering difference in administrative overhead in Medicare, as opposed to private insurance, is casually dismissed by those who appear literally DEVOTED to being robbed blind.
It's a simple, irrefutable fact that universal single-payer, funded through the income tax, would result in a DRAMATIC decrease in health insurance cost to every American... if we can ever get past the ideological smoke and mirrors.
What we need is a system where everyone has access to healthcare, and a system to harness the power of the masses in negotiating pricing with the pharmaceutical companies. The government can play a role in this.
As for "tossing it into the government", I defy you to identify a larger pool anywhere on this continent, and the entire premise and viability of group insurance is BUILT on a large enough pool to support claims as they occur. You also haven't addressed my other central point: private insurance corporations EXIST ONLY TO MAKE MONEY.
Your faith in the private sector, even with "adjustments", is ill-placed where health care insurance is concerned, and the legitimate problem created by burgeoning pension costs has NOTHING to do with the health insurance issue... they're a matter of contracts, entered into voluntarily, now coming back to bite state governments.
I'll conclude where I began... DO THE MATH.
Perhaps you might extend your logic on the application of removing the "free market" from the healthcare system. You say that fire protection is a public good, yet fire insurance is private while the act of fire protection is mostly public. If profit is an evil with respect to healthcare, then the entire system should be made a public good. Make the "firefighters" (the doctors who are mostly for-profit today) public employees and make the "firehouses" (the hospitals that are a mix of public and private) government owned and operated. These people and organizations currently act with the profit motive in mind, and that needs to be eliminated with greater dispatch than the elimination of private insurance.
and the solution is to attempt to force each and every one of use to buy these garbage extortion policies from the predatory corporate entity.
You get what you deserve America!
For example, if a supplier can double their price but lose less than half the number of consumers, then it is in the supplier's best interest to raise their price. If there are 1,000 people willing to buy a widget from a supplier for $1 each and only 600 people willing to buy that widget for $2 each, free market economics says the supplier should raise the price to $2 and simply not supply widgets to the remaining 400 people. (1000 x $1 = $1000, while 600 x $2 = $1200.)
This is perfectly fine economics when it comes to selling iPhones because there is no ethical/moral issue related to whether a person should or should not be able to own an iPhone. However when it comes to products/services that do have ethical/moral issues – water, health care – then the free market model should never be applied.
Government must first demonstrate its ability to be a good operator.