Monday, August 17, 2009

Former Insurance Exec Spills Beans

Wendell Potter shared a commentary on CNN yesterday about exactly how insurance companies - like his former employer, Cigna manipulate the legitimate fear of many Americans to sabotage health care reform efforts.

In other interviews he shows exactly how Wall Street (the same folks that brought you the whole mortgage derivitave/housing crisis mess, Enron, Bernie Madoff....) directly influence premiums and denial of coverage for Ma and Pa Public on Main St. Guernica: snip:

"I’ll admit I knew that Wall Street looked at the medical-loss ratio. I knew it was an important measure. I didn’t know until, frankly, very recently how important it was. As recently as fifteen years ago, the medical-loss ratio in this country was 95 percent. Since then, there’s been great industry consolidation to the point that now there are seven companies that dominate. They’re all for-profit. During the time that this consolidation, this shift to for-profit occurred, the medical-loss ratio has continued to drop. Now it’s around 80 percent. That means twenty cents of every dollar goes to something other than paying medical claims. Just fifteen years ago, ninety-five cents of every dollar went to paying medical claims. This trend is due to pressure from Wall Street. If a company misses Wall Street’s expectations—if the medical-loss ratio starts to inch up—the company will suffer. I’ve seen companies lose 20 percent of their stock value in one day by disappointing Wall Street with their medical-loss ratio. "

I don't think average folks understand how Wall St. factors into it. Being fundamentally honest and hard-working themselves, they are loathe to believe that anything *other* than honest and ethical business practices would make a public company "successful". Even after Enron. And it's not that the executives of these companies are inherently evil - they are required BY LAW to do everything in their power to increase the value of their stock for shareholders. And the only way to earn the good opinion of Wall St. analysts is to make *more* profit this quarter than the same quarter last year. If they're operating at a steady rate of profitability - one that resulted in more coverage and more claims paid for consumers. Like 10%... that's not good enough for Wall St. They have to make 10.5% this year, 11% the next, 11.5% the next... etc. At some point, after you've cut costs and increased revenue by every ethical means available there's nothing left but to start ripping people off. At some point in the last decade they stepped over that line.

Critics of Potter have tried to write him off in the court of public opinion as just another disgruntled ex-employee. But if that were the case and he were making all of this up... where are the lawsuits for libel/slander? Cigna's got an army of corporate attorneys who could whip out a request to cease and desist in the space of a coffee break if there were any hint that what Potter is alleging is not provable in a court of law. Why no legal action? Because the last thing they want is their dirty laundry hung out to dry.

In case you missed it, here's a transcript of Potter's damning testimony before the Senate commerce committee at the end of June. Some snips:

"Unless required by state law, insurers often refuse to tell customers how much of their premiums are actually being paid out in claims. A Houston employer could not get that information until the Texas legislature passed a law a few years ago requiring insurers to disclose it. That Houston employer discovered that its insurer was demanding a 22 percent rate increase in 2006 even though it had paid out only 9 percent of the employer’s premium dollars for care the year before.
It’s little wonder that insurers try to hide information like that from its customers. Many people fall victim to these industry tactics, but the Houston employer might have known better – it was the Harris County Medical Society, the county doctors’ association."

No comments: