Critical Care Health Insurance Joan Lunden

Taking Note: The Managed Care Roller Coaster

At a health care forum held last year in Las Vegas, then-presidential candidate Hillary Clinton declared that she was intent on "taking money away from people who make out really well right now” in order to fund health care reform. When asked exactly which fat cats she was referring to, Clinton responded : “well, let’s start with the insurance companies.”

Clinton’s sentiment—that private insurers are making out like bandits while our health care system crumbles—is part of the received wisdom these days, especially amongst progressives who believe that for-profit health insurance doesn’t add much value to our health care system. But the reality is that in recent years, private insurers haven’t been doing so well financially.

Consider United Health Care (UHC), the nation’s biggest private insurer. Joe Paduda of Managed Care Matters reports that UHC will be cutting 4,000 jobs as part of a restructuring plan that includes eliminating Uniprise, one of its major brands. Since last fall, UHC stock has plummeted from $53 to $22 a share. WellPoint, another huge private insurer, has watched its stock drop from $82 a share in 2007 to $49 a share in June.

As Robert Laszewski wrote on the Health Care Policy and Marketplace Review in April,  “Wall Street finally seems to be figuring out that the health insurance business is, and has been for years, on a long walk off a short pier. What's sustainable about a business whose costs have continually exploded at 2-3 times the growth rate of the rest of the economy or the wage rate? Just where did Wall Street think this business was headed all those years the sector has been the darling of Wall Street?”

While the insurers’ premiums have been skyrocketing, so have health care costs: the prices of everything, from a pill to the screw that holds your artificial knee in place, have been rising. Most physician’s fees haven’t been increasing, but the volume of  services that doctors provide has—and so have hospital bills. Insurers, like the rest of us, have been running hard to keep up.

Worst of all, as employers bow out of the health benefits business, insurers are losing customers. “Perhaps most telling was the recent comment by one analyst in the Wall Street Journal ,” Laszewski noted. " ‘What we're seeing is a market that's gotten so mature and beyond its customer[s] that people can literally no longer afford to buy the product,’ said Sheryl Skolnick, an analyst with CRT Capital Group. ‘The number of uninsured is growing faster than any player in the game, and it's getting bigger.