The writer and curmudgeon Ambrose Bierce once described a banker as a person who wants to sell you an umbrella on a sunny day. A former judge and friend recently described an insurance company in similar terms as selling you coverage for everything except loss. One of the strange anomaly's of health insurance companies is that they make their money by not providing you the coverage you think that you are paying for. Health insurance companies have grown so big and powerful that in about half of the states there is little or no competition beyond two major providers. They make billions of dollars a year, but they do little for the price beyond providing a largely unnecessary financial load on the most expensive health care system by half in the world.
In his recent book Deadly Spin (Bloomsbury Press, 2010), Wendel Potter, a former public relations officer for Humana and CIGNA describes is evolution from insurance “spinmeister” to industry critic following the death of a 17 year old girl after CIGNA refused to provide her with coverage for a bone marrow transplant until it was too late. Potter describes the unsavory history of some tributaries of corporate public relations and their effect on the health insurance industry in successfully repelling efforts at reform.
The devices he describes are remarkably similar to those that one sees in negative political advertising. The use of fear, euphemisms, name calling, false front organizations with patriotic or jingoistic style names, the use of staged polls and the outright lies and deceptions which so successfully destroyed the Clinton health reform initiative and threatens to judicially eviscerate the 2010 Affordable Care Act.
It is interesting to see the same people who vigorously opposed the single payor concept and the “public option” to generate competition and keep prices down, attack the Affordable Care Act as not doing enough to lower costs. Potter stresses that in the PR world “perception is reality.” This appears to be so. The so called “death panels” that were fabricated by industry friendly politicians and pundits created false issues based upon fear. It was startling to see people showing up at congressional “town meetings” in 2010 demanding that “Government keep your hands off my Medicare.”
The bottom line of Potters book is perhaps reflected in his section on the MLR or Medical Loss Ratio. This is the percentage of premium dollar that is actually spent on medical care. What’s left goes to overhead, salaries, bonuses, administrative costs and profits. Wall Street carefully reviews MLR of companies and an increase can lead to drop in share prices and bonus compensation for executives. Medicare’s MLR is about 97%, leaving a 3% administrative cost margin. The average MLR among major insurers in 2000 was about 95%. In 2007 it dropped to 81%. Between 2000 and 2008 insurers hiked insurance premiums for employer sponsored groups by 97% for families and 90% for individuals. During the period private insurance costs grew about 73%, yet medical inflation only grew by 39%. Wages increased by 29% and the overall inflation rate grew by 21%. Do the math and and you can get a pretty clear picture of the vested interest of the health insurance industry in keeping things the way they have been. The only problem is the recent growth of health care costs from 12% of GNP to 17% is as sustainable as putting two wars on a credit card and then reducing taxes. Anybody remotely interested in this topic, and we all should be, must read this book.
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