“Aetna, Obamacare and Health Insurers’ 10 Dirty Secrets”
by Brett Arends
"Whom do U.S. health insurers think they’re kidding? The answer, of course, is: everybody. Industry giant Aetna AET, -0.79% just said it is dropping most of its Obamacare plans. That follows similar moves by rivals. It’s dealt a serious blow to the Affordable Care Act and its goal of universal health care in America. Conservatives I know say they are celebrating- somewhat prematurely- “the death of Obamacare.” Aetna cited losses on the plans as its reason. News reports since then say there’s another factor at play. The company may be engaging in political retaliation against the Obama administration for trying to block its merger with rival Humana HUM, -0.82%
But that’s not the only thing the industry isn’t being candid about. Here are 10 other things they won’t tell you:
1. They’re a scam. The entire health-insurance industry consists simply of taking our money- and then paying us back around 80 cents on the dollar, or less. That’s all. They add no value, and serve no other purpose. This is not Apple AAPL, +0.26% or Amazon AMZN, -0.94% or even your local restaurant. These companies do not innovate, take risks or create meaningful new products or services. They shuffle money- at a high cost. You and I are paying about 30% too much for our health insurance each year just to support these middlemen. It’s an undeclared private tax.
2. They are terrible gatekeepers. The one alleged justification for private health-insurance companies is that, because they have stockholders, they will be vigilant about preventing fraud and waste, and keeping down the cost of health care. The actual outcome? Here in America we have the highest health-care costs in the world. Oops.
3. They waste money hand over fist. Aetna said it has lost $430 million on Obamacare plans during the first two years. During that same time the company spent $23 billion on administration, marketing, paperwork, junkets, bonuses and other overhead. That’s a ridiculous 26 cents for every dollar it paid out in actual benefits. Yes, really. That included $32 million, over two years, paid to Chairman and Chief Executive Mark Bertolini. He spent more than $200,000 last year just in his personal use of the company’s private jets. How many nurses, and doctors, and lab technicians- people who actually provide health care- spent $200,000 last year taking private jets on vacation?
4. They’re booming. You remember all that talk about Obamacare and “socialism” and Saul Alinsky and the “government takeover” of the health-insurance industry? Since Obamacare passed in March 2010, Aetna’s stock has rocketed 270%, with dividends reinvested. Rivals Cigna CI, +0.29% and Humana have risen about the same. (The benchmark S&P 500 Index has increased 99%.) UnitedHealth Group UNH, -0.09% is up a staggering 371%, meaning a dollar invested at the advent of Obamacare is worth almost $5 today. “Socialism” never looked so profitable.
5. They avoid sick people. The No. 1 way to make a profit in health insurance isn’t somehow to provide “better” insurance or “better” service for customers. It’s to sell health insurance to people who won’t need it. That’s why these companies fall over themselves to try to sign up young white-collar professionals with no kids. That’s why they always avoided people with “pre-existing” conditions. Aetna said it was losing money on Obamacare because it had too many sick customers who wanted to use their insurance. Bummer.
6. They deny treatment whenever they can. It’s not malice- it’s math. Private health insurers only make money if they keep payouts below premiums. Actually, because of their high costs, they need to keep the payouts way, way below premiums. And that means if their customers do get sick, they have every incentive to try to deny treatment. Massachusetts just had to pass a law making health insurers cover treatment for chronic Lyme disease, because the insurers had refused. The insurers, naturally, fought the law tooth and nail.
7. They own the government. Insurers, especially health insurers, are terrific sources of money for politicians of all stripes. That includes direct campaign contributions, and those lucrative lobbying jobs on offer for former politicians, and staffers, who’ve behaved like good little trained spaniels when allegedly serving the public. The Center for Responsive Politics, a think tank that follows money in politics, says that since 1998 the industry has spent at least $440 million on lobbyists, plus another $75 million in direct campaign contributions.
8. Their talk about “freedom” and a “government takeover” is cynical propaganda to protect their scam. Every other free country in the developed world has universal health care. That’s not just counting socialist countries like Denmark and Sweden. It’s counting countries like Germany and Japan and Australia and Canada and Singapore and Great Britain. What do they know that we don’t? When Obamacare passed in 2010, a money manager told me he was despairing of “socialist” America and he was buying Swiss francs, because at least Switzerland remained a capitalist country. Hey, dummy: Switzerland has universal health care. Actually, double dummy: Obamacare was modeled on the system used in … er … Switzerland.
9. The “market” for private health insurance is inherently flawed. You and I can’t shop for health insurance the way we shop for a vacation or a computer or a car. We don’t know if we’re going to get sick. Medical treatments are so complex and specialized, there’s no way for us to know what they “should” cost. We can wait till we need one to buy it. And the price of buying the wrong laptop, or no laptop, isn’t death.
10. Actually, “socialized medicine” already works in America- and people love it. Medicare covers 54 million of us over the age of 65, and it is a full-blooded, bona fide, Marxist-Leninist, communist, Soviet, government-run health-insurance plan. Any politician opposed to “socialized medicine” should be required to run for re-election on a platform of abolishing Medicare and replacing it with private health insurance. Good luck with that. Oh, and compared to private health-insurance companies, it is staggeringly efficient. Medicare’s administrative costs last year were $9 billion, compared with benefits of around $640 billion. That’s around 1.4 cents for every dollar paid out. Private insurers: around 20 times as much."