U.S. Senators Russ Feingold and Herb Kohl have sent a letter to Wellpoint President and CEO Angela Braly asking her to justify the recent hikes in insurance premiums for over 13,000 Wisconsinites, hikes which will be in the double digits here in Wisconsin. In their letter, Sens. Feingold and Kohl question if the increases in premiums are necessary, especially following a huge profit last year for the insurance company. According to the Wisconsin Office of Commissions of Insurance, Wellpoint intends to increase health insurance premiums for over 13,000 Wisconsinites who are currently enrolled in Blue Cross Blue Shield of Wisconsin Blue Access, Blue Economy, Blue Value, and Blue Preferred Plus plans.
“Last year, as 14,000 Americans lost their health insurance coverage each day, Wellpoint nearly doubled its profits and raked in $4.7 billion,” Feingold said. “Washington needs to find the courage to take on the special interests and act, because if it doesn’t, insurance premiums will continue to skyrocket and Americans will continue to be denied or dropped from coverage because of pre-existing conditions or because they change jobs. Wisconsin taxpayers and small businesses simply can’t afford the excessive premiums and higher out-of-pocket costs that are fueling insurance company profits instead of contributing to high-quality care for Wisconsinites.”
“Experts predict that health care premiums will double by 2020. That projection rings true when we hear about outrageous rate hikes like the one Wellpoint just instituted in Wisconsin, set to break the bank for thousands of Wisconsin families. This is the latest example of why we need to pass health reform legislation in order to make health care more affordable,” Kohl said.
Click HERE to view a copy of the entire letter.
Zach:
It may not be popular to point out, but all insurance premiums are a reflection of medical care costs, not a driver of them. Premiums increase, in general, due to increased usage (aka claims), increased charges from providers (in part to cover under payments by government entities), and a decrase in the pool of the insured.
In this case, all 3 facotrs occured in the same year. Costs of care rose, the pool of insured dropped, and usage increased.
As for the profits reported by Wellpoint, a significant portion of that $4+ billion was due to the sale of the pharmacy unit to another entity, and not from premiums. Furthermore, the specialty lines of business (Life, STD, LTD, Dental, Vision, Workers Comp, etc.) contributed the vast majority of the remaining profits.
In general, medical insurance is not highly profitable on its own. The margins are 2% or less in good years. Wellpoint relies on the sale of multiple lines of business in specialty domains to support the offering of Medical coverage at the lowest possible costs while remaining profitable on the whole.
As a point of comparison, Wellpoints 2% – 4% corporate profit margin is considerably smaller than that of Coke and Pepsi, which enjoy a corporate profit margin of almost 60%, for a p[roduct that has almost zero redeeming value incomparison to health insurance.
Please understand that Wellpoint is a publicly traded for profit entity, and requires profit to remain in opperation. That profit however, is very minimal as a percentage of revenue for an entity of its size. Were Wellpoint to reduce profitability further, it would not have cash reserves to absorb an unexpected spike in claims, risking the viability of coverage to ALL of its members.
Thanks for your time.
Nathan, I’ll take what you wrote with a grain of salt, considering you work for Wellpoint.
However, it’s worth noting rising medical care costs can also be attributed to the fact that health care providers pass on the costs of the uninsured that they treat (in their emergency rooms, for example) to insurance companies, who in turn pass on the cost to consumers in the form of rate increases. Seems to make the case for health care reform, doesn’t it?
Zach:
Isn’t it just a bit illogical to dismiss an opinion from someone with experience and knowledge of the industry as a whole? In order to gain that experience such a person necessarily has to have worked in that industry for a considerable time.
Or better stated, do you really believe its better that 500+ men and women are placing themselves in a position to run an entire industry that they have absolutely zero expertise in?
Where I work has really no bearing on the facts. I’m no corporate shill. If you seek evidence of that, look at the health care reform plan that Dan Sebring has put on his campaign site. Dan and I actually propose to dismantle 3rd party payers like WellPoint and force them into medical financing.
My opinion is that both parties are 100% missing the root cause of the issue.
You may prefer to make the WellPoint’s of the world the villains, and that is your choice, even if it is borne out of ignorance or leftist anti-corporate knee jerk thinking. I brought you facts and logic, hoping to help you understand the bigger picture.
You chose to respond with personal invective that is neither constructive nor relevant.
Uninsured people are part of the issue. I do not deny this. However, that alone is incapable of causing 20% annual inflation. That can only occur when Medicare and Medicaid payment levels are 25% of provider costs, and consumers have zero concept of the costs of what they are purchasing.
Putting everyone on Medicare will not suddenly change that. In fact, it would likely result in fewer providers willing to take a drastic pay cut. Fewer providers means less available care. I’m sure that isn’t what you want, and it certainly isn’t what I want.
Making care available to the most people at affordable prices should be the goal, and Medicare has proven that government run 3rd party payment does neither. It is insolvent, and far too many seniors are denied the care they need due to the rationing that must come in such a system.
I’m willing to look for a solution that doesn’t just turn the government into the largest Wellpoint in history, which is what single payer is in the end.
I’m not here to make enemies or start fights. That is not productive. But if you are unwilling to concede that the 3rd party payer system is broken, and instituting another in its place will result in failure just as spectacularly, we have no hope of finding a solution.
Nathan really makes some great points here. Points that have gone unheard by those that support the current push for national health care. I dont think that many would argue that the current system needs to be fixed, but if we are going to fix the problem by putting a program in place that will undoubtedly lead us into the same place we are today we are only making matters worse. To expect that the government is better suited to address this problem than private companies who have all the expertise is down right crazy. The proposals that have been brought forth by our current administration are not the answer. If you want to know how people feel about government run health care, talk to a veteran. I am sure they will have plenty to say about the VA and how they are treated!