Las Vegas Undressed

Wall Street and Health Care

So, let’s talk about Wall Street and how it can impact your health care policy and any future changes that might have a direct impact on you. I’m sure that many of you are asking the question: “What does Wall Street and the stock market have to do with my health insurance?”

The stock market is all about expectations and whether they are being met. It is all about meeting last year’s numbers!

People are special, unique, and should not be a number in some corporation’s computer.
 
Wendell Potter, former Vice President at CIGNA, has these words that explain Wall Street and expectations as they relate to insurance companies.  This is part of a continuation of the interview of Potter by Bill Moyer on PBS.

“Well, there’s a measure of profitability that investors look to, and it’s called a medical loss ratio. And it’s unique to the health insurance industry. And by medical loss ratio, I mean that it’s a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry’s been dominated by, or become dominated by for-profit insurance companies.”

“Back in the early ’90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent. “So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they’ll punish them. Investors will start leaving in droves.”

“I’ve seen a company stock price fall 20 percent in a single day, when it did not meet Wall Street’s expectations with this medical loss ratio.”

This is Wall Street pressure I was talking about earlier and it is totally inappropriate to tie this kind of behavior to health care.

Potter: “they think that this company has not done a good job of managing medical expenses. It has not denied enough claims. It has not kicked enough people off the rolls. And that’s what…happens, what these companies do, to make sure that they satisfy Wall Street’s expectations with the medical loss ratio.”

The question asked by Moyer is “And they do what to make sure that they keep diminishing the medical loss ratio?”

Potter:  “Rescission is one thing. Denying claims is another…….But another way is to purge employer accounts…..if a small business has an employee, for example, who suddenly has have a lot of treatment, or is in an accident…medical bills are piling up, and this employee is filing claims with the insurance company. That’ll be noticed by the insurance company.”

And they’ll say, “We need to jack up the rates here, because the experience was more than we anticipated. So we need to jack up the price. Jack up the premiums. Often they’ll do this, knowing that the employer will have no alternative but to leave. And that happens all the time.”

Moyer points to a column written by Potter “Obama’s false friends of health reform.”  He asks about Ron Williams, who is at the top of the list of insurance executives in terms of their compensation. “Who is Ron Williams, and why do you use him as the example of what Wall Street expects and wants from the insurance companies?”

Williams was recruited by Aetna from Wellpoint. Aetna was consolidating a number of acquisitions and wanted him on board to handle the transition. He was an IT guy and he revamped their system. They had reached an enrollment of 21 million members and their ratios were not looking good. Their stock was falling and needed solutions to the problem. A people problem?

Potter: “So with that new system, he was able……to identify the accounts that they wanted to get rid of. And over the course of a very few years, they shed eight million members. So, predictably the stock went up and compensation to Ron Williams did the same; this is the capitalist system.”

Do you feel comfortable with this concept?

Moyer: “As this debate unfolds in the next month, into the fall, what should we be watching for? Tell us as an insider what to look for that is more than meets the eye?

Potter: “When we see the actual legislation, when there’s something before Congress, and it will happen, presumably, within the next few weeks, you’ll start seeing a lot more criticism of it. And the special interests will be attacking this or that. The AMA will be upset about something. The pharmaceutical industry will be upset about something. The insurance industry will not like this or that. It’s, you know, a lot of money is made in this country off sick people. And then you’ll start seeing a lot more of the behind-the-scenes attacks on this legislation, in an attempt to kill it. The status quo is what would work best for these industries.”

Moyer: “In other words, if the industry is able to kill reform, or the Democrats and the Republicans can’t agree on a proposal, that’s what the industry really wants.”
 
Potter:  “Yeah, the status quo works for them. They don’t like to have any regulation forced on them or laws forced on them. They don’t want to have any competition from the federal government, or any additional regulation from the federal government…….They want us all to be insured.”
 
Moyer: “For the government to require every one of us to have some policy.”
 
Potter: They don’t want a public plan. They want all the uninsured to have to be enrolled in a private insurance plan…they see those 50 million people as potentially 50 million new customers.”

Potter noted that “people who are enrolled in our Medicare plan like it better. The satisfaction ratings are higher in our Medicare program, a government-run program, than in private insurance……they don’t want you to remember that or to know that, and they want to scare you into thinking…….that any government run system, particularly those in Canada, and UK, and France that the people are very unhappy…….people will have to wait in long lines to get care, or wait a long time to get care.”

“I’d like to take them down to Wise County. I’d like the President to come down to Wise County, and see some real lines of Americans, standing in line to get their care.”

My thanks go out to Bill Moyer and his desire to bring transparency to the issue of health care. Wendell Potter is a stand up guy and I thank him for informing the public on the issues involved with the current health care crisis. 

Remembering Bobby and John Kennedy’s favorite quote “The hottest places in hell are reserved for those who, in times of moral crisis, maintain a neutrality.” 

Here is the link to the video interview done by Bill Moyer.