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Health insurers sit pretty at their customers’ expense

Los Angeles TImes, 11/9/10

By David Lazarus
Los Angeles Times
November 9, 2010

'People aren't getting the care they need because they have to pay more out of pocket,' says the president of Consumer Watchdog.

It's a good time to be a health insurer.

Three of the biggest names in the insurance game reported rock-solid profits last week. Aetna said its third-quarter net income jumped 53% over the same period last year, to $497.6 million. WellPoint, parent of Anthem Blue Cross in California, said its profit rose 1.2% to $739.1 million. Health Net posted a net income of $62.7 million, compared with a loss of $66 million a year earlier.

Angela Braly, chief executive of WellPoint, attributed the company's strong performance to "disciplined administrative expense control."

Aetna CEO Ronald Williams was more expansive. He cited "a reduction in utilization of healthcare services after the surge we saw in 2009, combined with appropriate pricing and effective medical quality and cost management."

Well, that sounds fine and dandy until you parse what exactly he's saying.

That "reduction in utilization of healthcare services" basically means fewer people went to the doctor. Did we all suddenly become healthier? Not likely.

Jamie Court, president of Consumer Watchdog, a Santa Monica advocacy group, said Americans are skipping doctor visits because they've switched to plans with higher deductibles or their employers have jacked up co-pays.

"People aren't getting the care they need because they have to pay more out of pocket," he said.

This raises an interesting question about the looming reform of the nation's healthcare system, under which everyone will be required to have insurance. If available coverage is too pricey for people to use, will Americans be any better off, health-wise?

While most insurance policies will cover catastrophic events, it's entirely possible that healthcare costs will be too high for the sort of routine care or preventive treatment that can head off illnesses before they become debilitating.

Then there's that bit from Williams about "appropriate pricing." What's that mean?

"Rate increases," answered Sabrina Corlette, a research professor at the Georgetown University Health Policy Institute. "It means higher rates, as well as more aggressive underwriting that excludes people for certain conditions or charges them higher premiums."

In September, the California Department of Insurance approved a 19% rate increase for 65,000 Aetna policyholders.

This followed rate hikes of as much as 29% for Anthem Blue Cross, Blue Shield and Health Net, affecting more than 1 million policyholders.

According to the Kaiser Family Foundation, workers now pay 47% more for family health coverage they receive through their jobs than they did five years ago, while wages have gone up only 18%.

And what about "effective medical quality and cost management"?

Court at Consumer Watchdog said this is just another way of saying that insurers are denying more claims. "It's code for some bureaucrat somewhere telling people that a treatment isn't necessary," he said.

The average health insurance agent now receives more than 200 requests annually from clients to provide assistance in pursuing a claim, according to a survey released this month by the National Assn. of Insurance and Financial Advisors, an industry group.

Most agents say they have to contact an insurer at least twice on behalf of a client, the survey found. Eleven percent say they have to make six or more calls in trying to help resolve a claim.

"The most effective cost management for insurers is to decline services," said Ron Pollock, president of the advocacy group Families USA. "And when there's a dispute, it's often very difficult to get a satisfactory result from an insurance company."

It's a good time to be a health insurer. For patients, clearly, not so much.

Phone rates rising

The consumer-watchdog division of the California Public Utilities Commission is calling on regulators to extend price caps for basic residential phone rates. Limits on how much rates can go up will end Jan. 1.

A recent report by the commission's Division of Ratepayer Advocates concluded that deregulation of California's phone market hasn't resulted in increased competition and, instead, has led to higher prices for various services.

"Lifting the price caps on ancillary services has served only to raise rates for consumers," said Joe Como, the division's acting director. "The same will happen to basic rates on Jan. 1 unless the CPUC acts now to protect consumers who depend on affordable phone service."

A separate report by California's Senate Office of Oversight and Outcomes found that state regulators have largely ignored the telecom market after declaring four years ago that sweeping deregulation would usher in a new era of market competition and lower prices for consumers.

According to the report, AT&T and Verizon control 85% of all land lines statewide and 65% of telecom services in general — about the same market share they held before deregulation. Meanwhile, prices for some services, such as having an unlisted phone number, have soared by as much as 600%.

Como said the commission should maintain limits on price hikes for basic residential phone service "until the CPUC sets rules that will result in reasonable and affordable rates."

A spokeswoman for the commission said it would review the division's request. In the meantime, don't hold your breath.

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