Since 1990, the cost of health care (excluding insurance) has risen by 5.8% per year, so that $1000 in in 1990 is now $2919.
If this made up 70% of premium charges, then the insurance premium associated with that cost would have risen from $1300 in 1990 to $3795 in 2009.
That isn't what has happened. The health insurance industry has raised premiums by 8.2% since 1990, so a $1300 premium associated with $1000 in health care costs back in 1990 is now a $5811 premium associated with $2919 in direct costs.
This means that if they started out charging %30 over their direct costs in 1990, they charged 53% over direct costs in 2009.
This is part of the reason why WLP has been one of the only companies able to double their income between 2005 and 2009.
This is how they can afford extravagant compensation packages for the CEO and the top execs at WLP. It's also how they afford to put millions of dollars into the campaigns of politicians like Joe Lieberman, who effectively shut down the health care reform bill for them.
And, it's how they pay Femdup her $50/post to hang around here all day.
amat, your argument might have legs if WLP insured EVERYONE, then all the costs in the system would be borne by the % increase you mention would also reflect the WLP cost increase, but it doesn't because they don't insure everyone. And, since the healthy are most likely to drop out, their costs go up, but the revenue goes down, so they have to increase their premium per member to cover the costs, so it is expected that the premium would go up more than inflation. What's amazing is that it is not going up more...
Ha...that's very funny. No, I actually consider myself very fortunate in that the core business was here before me and in the family since the 30's. Believe what you want...I really don't care...oh, by the way...you thought I was Fem too...and least your consistently wrong.
Yes, I have a little too much time on my hands right now...rehab from knee replacement (yes, it's covered) and I'm still not cleared to drive. So you're right...this is a silly chatter board...oddly enough, you're spending time here too...hum?
Created the chart...right! Nothing adds up? Please - prove it. Your opinion is meaningless without proof, which you've yet to provide. You've had your chances and nothing...NOT one shred of evidence to support your gross exaggerations and faulty assumptions.
Favors...I am...pointing out the fraud that you are. Convince us with data...not your opinion. Your initial argument was weak trying to correlated two data points that do not necessarily tie together because they can't. Even the Bureau of Labor Statistics (who calculates CPI) indicates that fact in their reports. Oh...I'm sorry, I'll so using documented information from real and credible source...it gets in the way of 'your' reality of the world.
MCPI measures the commodity price differences in medical goods and service, and the BLS specifically states that "utilization" and "benefit differentials" are a barrier to connecting the cost of medical services and the cost of insurance.
So...I'll continue to trust real data...and not your opinion.
Here we go, now we get your fantasy life of danish, conference tables, people who do things for you, multiple companies under you able stewardship. Give it a rest.
Nobody with that kind of life could or would spend the HOURS you spend on this silly chatter board.
I like the little blogspot unattributed report you posted - probably created - with everything as "medical cost" and percentages that never add up.
Do us a favor - do yourself a favor - seek out therapy. Does your policy cover that?
One last note...the important factor you either fail (or refuse) to recognized (or don't understand) is: MCPI measures the increases in the cost of medical services, not the cost associated with the increase utilization of the services, which has a multiply effect on MCPI.
Do you argue the fact that, the older we get, them more we demand services from the system? Do you deny the fact that the average age of our population over the same time period has increase because of the greater use of medical service?
Ignoring this is insane...not accounting for it in your 2.4% differential is a joke.
Here's a little fun fact...when I purchased my first group contract for one of my companies in 1983, we added drug coverage. It represented 3 - 4% of my healthcare spend for several years. It really ramped up in the 90's. Last year, drugs represented 24% of my total spend. Oh sure the cost of drugs have gone up and 'is' accounted for in you 5.8%. But, what gone up more, is the number of drugs being given. Now you can argue that it's saving me money by having lower hospitalization expenses...well no, because long term stays have be shifted to a higher frequency of outpatient services so my cost trends continue to rise with my demographics.
I own several companies under one holding company and have been self funded since 1983...I know exactly how and where my money is going.
Last note: When I compare my cost per employee for the administrative service contract, to the claims expense per employee...guess what? It's just under 15% of total cost. I'm not including the cost for my stop loss because that's really a liability coverage and only triggers if we exceed a certain claim level.
No, I don't prepare financial statements, never claimed that I did. But I do know how to read them. I like being in a position to have people do that for me...the team comes in, we sit at my conference table, drink some coffee, enjoy a danish...review the reports every month. A glorious monthly ritual.
Here's another little report I found that does not support your numbers.
It's funny how I can't find any credible data to support your assumption...you haven't supplied any...and I've research some of your claims...nothing.
Sorry, I don't bank on assumptions that can't be supported. And if you were preparing my financial statements, with the the gross exaggerations your making here...you'd be fire!
I'm keenly aware of how insurance and insurance companies work, your little story in the last two paragraphs isn't needed. I buy and would endorse a 30% 'cut' in the P&C business (except in years where there have been major calamities), but not the health. Again, haven't seen and can't find data that supports it.
This is what we know...and if we ASSUME your data is correct medical costs are rising at more than twice CPI. Medical costs represent (let split the difference) 80% of the health care spend...what will have a greater impact on total cost...a 10% reduction of the 80% of cost, or a 10% reduction of the 20% of costs? Hell, for that matter...let's use your number of 70%...the answer is the same.
We don't resolve the problem without addressing the cost of care. It does NOT let the insurance industry off the hook, because I do believe the have culpability in this mess. I also believe that these companies should go back to being Mutual, at least then I can have a little hope that their profits (contribution to reserves) are or may benefit me, the policyholder.
Well I'm sure you've never taken part in the preparation of financial statements, but even your reading of the 10-Ks would have put you at 75-80%, not 85%.
The Loss, Benies & Adjustments category is the one you are reading, and that is not the same number as direct cost of health care. Many investments and other expenses can be allocated into this type of category, and are. If you used this as a metric to develop the average per capita direct cost of health care, it would be much higher than the actual value.
Your argument regarding prospective costs counters your other argument, but makes an interesting point: based on 2009 premiums, the anticipated direct costs of 2017, plus 30%, are being taken as premiums now.
Insurance is a business model based on socialistic economic principles: the pooling of the resources of many reduces the unforeseen risk to a few, making the whole more secure. People buy into it because they don't know if they might be one of the unlucky few.
Insurance companies get a cut of the pool for managing it. They don't contribute to the pool, nor do they provide any of the services purchased with the pool. They are just the holders of the money, placing an educated bet on the cost of services, and taking a 30% cut. Or, a 50% cut over present costs that will probably be 30% over costs in eight years, or some such crap.
Have you ever read an Annual Report or the financial statements of the major health insurance carriers?????? Their expense rations are all listed. Your 35% on average is a gross exaggeration of reality.
Benefits Expense Ratio for Wellpoint and Major Competitors, 2005 - 2007
2007 2006 2005
Aetna (AET) 80.4% 79.9% 77.4%
UnitedHealth Group (UNH) 80.6% 81.2% 80.0%
WellPoint Health Networks (WLP) 82.4% 81.2% 80.1%
Humana (HUM) 83.0% 84.0% 83.2%
Expense Ratios for 2008 were between 83.3 and 83.6% in 2008 and I don't know where they finished 2009. Point being, it's a far cry from what you are suggesting. Which begs the question on the rest of your data or source of data.
Paid by WLP...HA! Last payment I got was when they demutualized and I receive a $hit-load of stock from them.
My data sources WLP 10-K and the Bureau of Labor Statistics.
Actually, it's a 141% more, not 100%.
Specious argument...cost of care drives cost of premiums, premiums are developed prospectively...a forecast of FUTURE cost...not cost today, so they will always lead current cost of care. Furthermore, a DECREASE in the cost of care will lead to a corresponding DECREASE in premiums. Look at the data from the early late 80's through the 90's has managed care became the vogue...costs came down and so did premiums.
I didn't deny that there were improvements, only that there was and is a continued investment in these projects, and that you made yet another gross exaggeration of a 50% improvement from leveraged technology. Furthermore, what's not included in some of the numbers are cost associated with failed or delayed system migrations that show up in other components of their financials, such as performance penalties. Just like squeezing a balloon, cost come out somewhere else.
Where do you get your 85% number? Even if 100% of premium revenue went to paying direct costs of health care in 1990, only 65% would be used that way now. The other 35% would be the accumulated difference between cost and premium increases.
Also, if the CPI was 2.45%, and the MCPI was only 100% more, well, why is the PCPI 230% more? I didn't defend the rise in Medical Consumer Price Index, but it is way less than the rise in insurance Premium Consumer Price Index. So much for your umpteenth specious argument. How much does Wellpoint pay you? Not much, I hope.
Despite all the investment Wellpoint, Cigna, Aetna, and the others may have made in updating their systems, the gains in productivity were positive. This is documented in their cash flow statements.