On Wednesday, I traveled to Washington, D.C., to testify in front of Senate Commerce Committee* on one of the things that outrages me the most about our health care system: insurers who deliberately fool customers into thinking they’re getting good coverage when they’re really getting junk insurance that won’t pay their medical bills when they get sick.
But enough about me. The star of the hearing was the conservatively-dressed, quiet-spoken middle-aged guy who sat next to me at the witness table. Wendell Potter, a courageous former senior executive at Cigna, the big national health insurer, used this hearing to go public with his insider knowledge* about how health insurers "confuse their customers and dump the sick—all so they can satisfy their Wall Street investors."
Why did he take this step? Because, he said, he realized that "the industry’s charm offensive—which is the most visible part of duplicitous and well-financed PR and lobbying campaigns—may well shape reform in a way that benefits Wall Street far more than average Americans."
"The top priority for for-profit companies is to drive up the value of their stock," he explained, and to do that, they must meet Wall Street’s demands to spend as little as possible on what the industry calls the "medical loss ratio," but which you and I call "our health care."
"I have seen an insurer’s stock price fall 20 percent or more in a single day," he said. "The smoking gun was the company’s first quarter medical loss ratio, which had increased from 77.9 percent to 79.4 percent." In other words, because they had the gall to pay out more money—money, remember, that came from premium-paying customers like you—on those customers’ health care than their Wall Street overlords thought they should. (By contrast, Medicare—a "government run health care" plan you may have heard of—devotes only 1.4 percent of its yearly expenditures to administrative costs. Since by definition it doesn’t earn a profit, that’s the equivalent of a medical loss ratio of 98.6 percent.)
Insurers have many anti-consumer tricks up their sleeves to avoid paying out money for health care, Potter said. In addition to selling junk policies, they routinely comb through the medical records of people who file big claims to see if they omitted anything from their health history, however minor or unrelated, when they applied for coverage—and then cancel their policies if they find it. Last week, at another congressional hearing, insurance executives flatly refused to stop this practice, called rescission.
Then there’s a practice called "purging" that targets small business customers. If a business files higher-than-expected claims, companies will immediately hit it with a premium increase that will force it to change insurers or stop covering its employees completely, Potter said. To give you an idea of how profitable this practice must be, he noted that insurance giant Aetna found it well worth it to spend $20 million to computerize the hunt for accounts to purge. In a few years it had had gotten rid of 8 million unwanted customers, a feat that drew admiring reviews in the business press.
"The industry and its backers are using fear tactics to tar a transparent, publicly-accountable health care option as a 'government-run system'," Potter concluded. "But what we have today is a Wall Street-run system that has proven itself an untrustworthy partner to its customers."
—Nancy Metcalf, senior program editor
See our Guide to Health-Care Reform to find out what we're doing to help fix the broken health-care system and for answers to your questions on health insurance, patient safety, and comparative effectiveness.
*Links to PDF
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