A Peek Into the Heart of a Health Insurance Giant

http://www.aetna.com/news/news...
I have pasted above the link to AETNA's Second Quarter 2009 results released today, July 27, 2009. I have also posted a link to the Summary of this report.
http://www.aetna.com/news/news...
Although reading this report may lead to spontaneous 360 degree head rotation, it will provide the clearest insight into the financial workings of the third largest insurer in the US. This report allows one to understand the financial goals of the company, how those goals were or were not achieved, the current profit listings and the breakdown of how those profits were generated.
How does this information relate to Health Care Reform?
Most of us agree that we want affordable health care. Health insurance companies control health care for all intents and purposes. How many Americans pay out of pocket for treatment versus how those who pay through their insurance companies? Of those who pay directly, how many have the ability to negotiate the price of their services directly with their providers? Only insurance companies have the resources and wherewithal to do so, and the public willingly pays for those service in the form of premiums, deductibles and co-pays. So critical is the role of health insurance companies in negotiating lower, supposedly more affordable costs, that many Americans worry that any changes to the current system will jeopardize their ability to obtain future medical treatment. Only through slow attrition of numbers, as policy holder after policy holder is denied access to vital services after making a claim on their policy, do they realize how fragile and imperfect is the system.
Profit drives health insurance. Insurance companies, like all publicly owned corporate entities must make a profit, and they must pay their shareholders dividends before paying themselves. This quarterly report is the companies financial statement to their shareholders, and clearly AETNA made a profit even after taking losses. They even made a profit on their operating expenses. They made a profit from our premiums.
According to AETNA's report:
"Total company results
* 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."
According to the report, AETNA's profits increased by ten percent, and our premiums increased eleven percent. Interesting. What does an eleven percent increase look like on paper? If one paid $250/month in premiums per month in 2008, and had them raised by 11% in 2009, the new premium would be $277.50. Unfortunately for many of us, our premiums increased by a tiny bit more. I will gladly use my rate increase. For two years I paid $248, then last month, my rate increased to $317. That constitutes a 21% increase in premium from 2008 to 2009. I have a portable insurance policy, and pay all my own premiums. I have a high deductible as well,and pay 20% of the first $10,000 because I have an 80/20 plan. My company has only paid $740 towards my medical expenses.
AETNA is not my insurance company, but the portfolio for my insurer reads very similarly.
Why did our premiums increase by eleven percent?
Perhaps we can find some clarity in this statement:
"Total Operating Expenses were $1.5 billion for the second quarter of 2009, $66.0 million higher than the second quarter of 2008, reflecting a previously disclosed increase in the financing component of pension expense partially offset by $38.2 million in insurance proceeds related to certain litigation we settled in 2003. The operating expense ratio (3) was 17.4 percent and 17.8 percent for the second quarter of 2009 and 2008, respectively. Including net realized capital gains (losses) and the litigation-related insurance proceeds, these percentages were 16.9 percent for the second quarter of 2009 and 17.9 percent for the second quarter of 2008."
The report states that $66 million of AETNA's operating losses were related to a financing component of "pension expense." The loss was offset by proceeds from litigation. So if the company took a loss not related to actual medical expenses, and those losses were partially offset by other proceeds, why then were premiums increased by eleven percent, and why were losses from "pension expenses" factored into the equation?
What are we paying for Alaskans? In its quarterly report, AETNA does not clearly relate the losses they incurred to medical costs paid out on claims, yet that is what one would expect to hear from them as a justification for increasing premiums. What AETNA, and I imagine other insurance companies, tell their shareholders regarding losses appears to conflict with what the policy holders are told, and what has been oft times reported by those who oppose health care reform.
Health insurance can be beneficial. No question. I could not afford to pay out of pocket for the various medical expenses I have incurred over the years. I have paid over twenty thousand in cash over the years when I didn't have insurance coverage, and that cost me a dream at one point. Unfortunately, health insurance has overstepped its bounds, and doesn't function in the manner it represents itself to its clients. Worse still, its clients are captive. Businesses have to provide it, and anyone who doesn't wish to be strangled with medical debt carry a policy. Insurance companies now stand between the public and its ability to access affordable medical care.
These words from the Cautionary Statement provided in the report are of particular worry to me.
As regards factors contributing to potential corporate losses, "...which can significantly and adversely affect Aetna's business and profitability; failure to achieve desired rate
increases and/or profitable membership growth due to the slowing economy and/or significant competition, especially in key
geographic markets where membership is concentrated; continued volatility and further deterioration of the U.S. and global
capital markets, including fluctuations in interest rates, fixed income and equity prices and the value of financial assets, along
with the general deterioration in the commercial paper, capital and credit markets, which can adversely impact the value of
Aetna's investment portfolio, Aetna's profitability by reducing net investment income and/or Aetna's financial position by
causing us to realize additional impairments on our investments..."
Clearly, we the policy holders, appear to be little more than factors in an investment portfolio. By their own statement, AETNA sees increased competition as a threat, yet the public has had it rammed down its collective gullet that free market competition benefits us. It does but only if competition is allowed to exist and thrive.
Finally, the Cautionary Statement allows us insight into what measures the lobbyist who support the insurance industry have taken to see to it that the companies they represent do not realize "additional impairments on {their clients} investments."
So to summarize, the message for sick America is this: If the insurance companies need to negotiate lower prices for your treatment and subsequently cut back on the type, quality or amount of medical services in order to achieve greater profits for the shareholders whose rights to a return on investment is held in greater esteem than your right to adequate medical care, then so be it.
This is what this fight comes down to, and I refuse to let any paid mouthpiece steer me or my elected representatives away from the truth.