An Alaskan's Response to Obama's Speech in North Carolina

Here is the link to the article published on the Huffington Post.

http://www.huffingtonpost.com/2009/07/29/health-care-progress-seen_n_247102.html

Here is my favorite quote from the speech.

"We have a system today that works well for the insurance industry, but it doesn't always work well for you," Obama told more than 2,000 people in a North Carolina high school gymnasium. "What we need, and what we will have when we pass these reforms, are health insurance consumer protections to make sure that those who have insurance are treated fairly and insurance companies are held accountable."

I had so much fun pouring over AETNA's second quarter result for 2009 that I just cannot pass up the chance to do the same for Assurant Health.

Assurant is my health care provider. While technically I am not an investor who has purchased public shares in the company, I do feel that the money I pay each year in premiums and fees (increased 21% from 2008) more than justifies my right to listen in to this conference. I encourage other Assurant members to do the same. The result will be posted at www.assurant.com, so those folks understandably not inclined to crawl out of bed at a beastly hour of the morning can read it then.

I myself simply cannot resist the temptation to peek behind the curtain to the wizard, er, I mean the men and women running the show. They seem to have some magic with which to enthrall and mystify certain members of the Democratic party who represent Americans in the US House and Senate. What fairy dust has been sprinkled upon the bone that lures the Blue Dogs away from the path of the single payer system that many, many, many Americans want them to explore?

Seriously, I think the crux of the Blue Dog dilemma lies in the fears harbored by their own constituents. Its all about votes and currying favor. I don't think they or their constituents understand the current system well enough to choose to scrap what they have in favor of a better one.

Many Americans are unhappy about the high cost of medical care, but they fear that they might lose what they have now. They prefer the tangible, flawed and unreliable as it may be, over the intangible with its uncertainties and ambiguities. The only solution is to shed light on the current status of private insurance. By doing so, its flaws can be revealed and explored. Once that has bee accomplished, a meaningful and productive discussion can begin and a long term solution found.

I wrote a piece a week ago that touched on the state of the economy as it relates to the baby boomers. That relationship extends to the insurance industry. For many, many years, health insurance industries have reaped the benefits of the earning capacity of the boomer generation. In fact, when certain "not for profit" companies realized the potential profits to be had in the health insurance business, they pushed for deregulation of the industry, and lobbied fiercely for the right to operate as "for profit" entities. Since then, memberships (defined as policy holders paying premiums) have stayed steady for twenty plus years, and times have been good. The boomer generation has been relatively healthy, resulting in low ratios of payout for medical expenses (MBRs), equating to a stable income for health insurance companies. So stable in fact, that larger, umbrella organizations considered it a feather in their corporate cap if they owned one or more health insurance companies. Gramm Leach Bliley passed in 1999 allowed those umbrella corporations to purchase as many as they could afford, and henceforth health insurance and its relation to the medical industry changed forever.

Unfortunately, as the baby boomers grow older, and deal with increasing numbers of age related medical problems, the profits from those premiums are shrinking. The insurance companies have to start paying out on the premiums they have been collecting from the boomer generation for years, but they must also maintain the existing profit margins. Gotta keep shareholders happy, and gotta pay those bonuses, er pensions ($66 million I believe). Where did the money go that was paid out in premiums month after month, quarter after quarter and year after year?

Why is this question important, and why do I want it to be important to anyone who will read? We need this money. We paid it, and we want it. Where is it, and why has no one posed this question to insurance companies, or to the government that should be regulating them?

AETNA states that they made a profit in 2008, yet our premiums were raised yet again in 2009 by 11% (AETNA 2nd Quarter Financial Report 2009). Even if I could swallow that medical expenses increased that much, which I do not (see US Bureau of Statistics), what happened to customer satisfaction? My outrage when I call and protest a 21% increase in premiums should mean something, but apparently it does not, because they would budge. I had to switch to a 50/50 plan just to get my premium back to an affordable level. I am still searching for the state legislation that allows them to jack my rates sky high. They say it exists, but I have not found it to date. The health insurance companies do not have to care, because the customers have no place to go to shop around for a better plan.

If the investors are protected from fraud, what about the policy holder? We don't even expect a return on our investment, just payment of medical expenses when they are incurred, and, heaven forbid, access to procedures that will help us cure what ails us.

The average medical to benefit ratio (MBR - the money paid out for medical claims in relation to premiums paid) is 84-85% for the commercial insurance and slightly less for private, so that leaves fifteen to sixteen percent in profit before taxes. The companies seem to average about ten percent profit after taxes and expenses. What happens to those profits? Do they get reinvested for future payouts? Was that not what we were told? What about the big pool of funds? What happened to our safety net?

The safety net disappeared when insurance companies were allowed to operate as for profit financial entities, and then allowed to operate under the umbrella of other financial institutions. Whatever is left over after taxes, payed out to shareholders and overhead, gets distributed however and wherever they see fit. Smart companies keep some in reserve for lean years, but smart operational policies have not dominated corporate methodology for the past decade.

This statement for AETNA's financial report pretty much sums up the state of financial affairs for the third largest health insurance provider in the U.S.

"Revenues excluding net realized capital gains (losses) increased 10 percent to $8.7 billion for the second quarter of 2009, compared with $7.9 billion for the second quarter of 2008. The growth in second-quarter revenue reflects an 11 percent increase in premium revenue and an 8 percent increase in fees and other revenue. This revenue growth reflects a higher level of membership and premium rate increases."

Based on these numbers and the formula for making a profit for shareholders, premiums will continue to increase as more Americans stop paying into the premium pool. It just warms the cockles of my heart to know that my premiums help keep the CEO's, CFO, C something or others and shareholders warm and dry at night while all over American, folks put off crucial medical treatment so they can afford to pay their rent, put food on their table, or gas in their tanks.

How can switching from "for profit" back to "not for profit" effect the profit margins seen by these companies? We have to buy insurance. It is that simple. If one does not want to see their finances eaten up with medical debt, one must participate in an insurance program. I would at least like to see a reversal of Gramm Leach Bliley, and have insurance companies removed from the list of financial entities that can be incorporated into an umbrella organization, because that is where the remainder of our premiums go. A "not for profit" agency could keep those premiums safe for the future. Some investment is okay, but not the wholesale free for all that has decimated our financial market.

Again, a statement from the AETNA financial report:

"We have factored the most recent medical cost experience into our actuarial methodologies in setting our June 30 reserves and into our revised full-year outlook," said Joseph M. Zubretsky, executive vice president and CFO. "Meanwhile, we continue to have a very strong financial profile and capital position, and our health care revenue growthis strong. In addition, we continue to effectively manage our operating expenses while making the appropriate investments to ensure our long-term competitive strength.

If the companies are doing so well, then why the blazes are we the people paying out the nose for substandard, overly manipulated, oft times contested until we are dead, medical treatment? Could those "appropriate investments" be related to the scores of lobbyist slavery at the heels of our representatives in Congress? How can we possilby be satisfied with this system, or as President Obama remarked, the current status quo?

Please write to the Congress men and women of states with Blue Dog democrats using postcards, cocktail napkins, the back of your insurance premium payment notice (Ooh, I like that one), and explain to them that you don't like the current situation in health care one bit. Write to the newspapers in these states and complain that Alaskans not only have to put up with Palin, but we pay twice as much in premiums as the rest of America for the same substandard medical care, and we want change.