When it comes to health care in these tough economic times, the average American just can’t seem to win. Year after year, health care costs continue to rise, increasing an individual’s out of pocket expenses through larger and larger premiums, co-pays and deductibles. These increasing costs are causing many Americans to put off dealing with health care issues, which may have even more serious health and financial repercussions in the future. So, when it comes to health care, is anybody winning?
Certainly, the nation’s big five health insurance companies – UnitedHealth, Wellpoint, Aetna, Cigna and Humana – are winning big, each reporting record profits for this year’s first quarter. As of March 31, 2011, UnitedHealth Group, for example, reported revenues of $25.43 billion, an increase of $2.23 billion from the same time last year. Philadelphia-based Cigna reported an increase in net income of 52% for the same time period. Aetna’s first quarter earnings were $560.2 million, or $1.43 per share, a 46% percent increase per share over 2010.
Health care insurance company executives are also winning big. Last year the highest paid chief executive officer in America was UnitedHealth Group’s Stephen J. Hemsley, whose 2010 total compensation was $101.96 million, of which $1.30 million was salary, $1.95 million was bonus, and $98.5 million was stock gains. Although it was slightly less than what he earned the previous year, Aetna CEO Ron Williams in 2009 received $18.2 million. Cigna’s former chief executive, H. Edward Hanway, on retirement received a compensation package of $110.9 million, while his successor, David Cordani was paid $25.4 million. A spokesman for Wellpoint stated executives’ high compensation is justified due to their efforts to improve care and hit corporate goals.
Despite the record profits and the over the top executive compensation, health insurance companies are still looking to increase subscriber rates. The companies’ say the often double digit premium hikes are needed in case there is a sudden increase in subscribers’ use of their medical benefits. Currently, due to the rising costs of health care, such as high premiums, co-pays and deductibles, many Americans have used their health benefits less, putting off needed care.
In an effort to combat unreasonable heath insurance premium increases, on May 19, 2011, the Department of Health and Human Service (HHS) in conjunction with the states and under the auspices of the Affordable Care Act promulgated a final regulation that could help to bring down the cost for consumers. Under the new regulation, in many cases companies seeking more than a 10% increase in premiums must publicly disclose the proposed increase and any justification they have for it. Federal or state expertswould then review the increases to determine if they are unreasonable.
While the effect this review process will have on lowering costs in the end still remains to be seen, it is a step in the right direction. Too long have health insurance company’s increased the out of pocket expenses a consumer had to pay with little to no justification for these hikes. Overseeing the way in which these companies raise their rates just might help to put the average American on a winning track when it comes to health care costs.