Health profits soar
Analysis finds largest insurers covered fewer people but earned 56 percent more
WASHINGTON – As the nation struggled last year with rising health care costs and a recession, the five largest health insurance companies racked up combined profits of $12.2 billion – up 56 percent over 2008, according to a new report by liberal health care activists.
Based on company financial reports for 2009 filed with the Securities and Exchange Commission, the report said insurers WellPoint Inc., UnitedHealth Group, Cigna Corp., Aetna and Humana Inc. covered 2.7 million fewer people than they did the year before.
The report Thursday also said three of the five insurers cut the proportion of premiums they spent on their customers’ medical care, committing relatively more to salaries, administrative expenses and profits.
Prepared by Heath Care for America Now, a coalition of liberal advocacy groups and labor unions, the report was aimed at bolstering the drive by Democrats to complete work on a health care overhaul, which insurers have vigorously opposed.
Industry representatives Thursday criticized the report’s approach, pointing out that 2008 was a bad year financially across many industries, skewing the 2009 comparison.
“It is disingenuous to look at the profits at one company today compared to where it was in the depth of a recession,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.
In California, Anthem Blue Cross, a subsidiary of WellPoint, is facing scrutiny over its decision to raise premiums for individual health insurance policies by as much as 39 percent this year for some consumers.
Thursday, WellPoint defended the rate increase in a letter to U.S. Health and Human Services Secretary Kathleen Sebelius, saying that the rising rates reflect soaring medical costs and will average closer to 20 percent for most customers.
WellPoint also said Anthem’s individual business in California lost money in 2009, as the weak economy prompted many customers to switch to lower-cost options.
Indianapolis-based WellPoint as a whole posted a profit, recording net income of more than $4.7 billion in 2009, thanks in part to the sale of its NextRx pharmacy benefit management business.
That put WellPoint’s profit margin at 7.3 percent, the highest of the five big insurers. Margins at the others ranged from 3.4 percent for Humana to 7.1 percent for Cigna.
Other sectors of the health care industry, including pharmaceutical companies and device makers, typically are more profitable.
But the industry’s improving financial fortunes is drawing more criticism because all but one of the companies achieved the better results at the same time they lost customers.
WellPoint shed nearly 1.4 million customers, a 3.9 percent drop over 2008, according to its filings. And Cigna lost 5.5 percent of its customers, or 639,000 people.
Only Aetna, which was the only company whose profits decreased from 2008, gained customers, picking up an additional 1.2 million people, an increase of 6.9 percent.