Insurers don’t bear the blame 
for costs

By Monye Connolly

Is it true that health insurers are to blame for inflating the cost of health insurance? For making “record” profits? For dropping coverage when members get sick? And for everything that’s wrong with our health care system?

In defense of an industry that employs thousands of Georgians, pays millions of dollars in taxes, helps contain the rising cost of care and ensures that millions of people can afford to pay their medical bills, consider:

Insurers aren’t driving up the cost of health insurance — medical costs are. “Medical costs explain nearly 89 percent of health plan increases,” according to a Rand study. It is the increases in medical costs — doctors, hospitals, technology and pharmaceuticals — that drive increases in health insurance premiums; not the other way around. Data from the Centers for Medicare & Medicaid Services show that health benefits cost increases have averaged 8.7 percent annually. At the same time, premium increases have averaged 8.7 percent annually.

Health insurer’s profits are 3 percent to 5 percent, compared with an average profit margin for the S&P 500 of 12 percent. Health insurers’ profits are far lower than those of hospitals, pharmaceutical companies, beverage or cleaning product makers, banks and restaurants. According to Kaiser Health News, “Even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.”

Competition is alive and well in the insurance industry — nonprofit and for-profit insurers compete every day in Georgia and nationally. While Georgians have the choice of choosing nonprofit insurers, Blue Cross and Blue Shield of Georgia, a for-profit insurer, covers more Georgians than any other. Contrary to the argument that private insurers’ “have a monopoly,” Georgia has more than 20 licensed insurers, and the competition is intense.

Insurance companies want to end the need to deny coverage for people with pre-existing medical conditions and support an enforceable mandate that brings everyone into the insured pool. To reduce the cost of health insurance, all Americans need to be insured; if not, only those needing health services would choose to be insured. The bill passed by the Senate Finance Committee includes a fairly weak penalty that would, in effect, allow healthy individuals to wait to purchase health coverage until they were faced with paying medical bills. As a recent Pricewaterhouse-
Coopers study found, this will result in higher health costs for all Americans.

Insurers can’t drop coverage for sick members. Federal law prohibits insurers from dropping sick members. Georgia law guarantees ongoing coverage for anyone covered through their employer. The National Association of Insurance Commissioners reports only 56 complaints nationwide for rescissions in 2007.

Far from being disgruntled with their coverage, insured Americans are highly satisfied with their own personal health plans. Approximately 160 million Americans are covered through their employers. And poll after poll shows they’re highly satisfied with their insurance coverage.

Costs are increasing because:

● Rising prices and the increased use of medical services — including hospital stays, drugs, new technologies and doctor visits.

● Cost shifting to the privately insured from providers who must cover their financial losses from treating the uninsured and those on government programs.

● Government regulations and new coverage mandates.

● Lifestyle choices — like smoking, overeating and inactivity — that cause health problems.

As Congress works on reform, we must demand that they do more than falsely vilify insurers. They must engage in an honest, fact-based debate that tackles the real health care cost drivers. This is the only way to create legislation that results in a sustainable, affordable, high quality system.

Monye Connolly is president of Blue Cross and Blue Shield of Georgia.