After our health insurance agent, explaining Empire Blue Cross' "need" to impose a more than 24 percent premium increase this year, said the company's operating margin was 16 percent after premiums and taxes — meaning only 16 percent of its revenues are available to pay operating expenses — I decided to do a little research.
I was reminded of how Empire Blue Cross, like other health insurance giants, converted from a non-profit company to a publicly traded, for-profit company earlier this decade.
In a secret back-room deal struck by Gov. George Pataki, Senate Majority Leader Joe Bruno and Assembly Speaker Sheldon Silver in 2002, the "three men in a room" and the nonprofit health care giant brokered to have the nonprofit's "social assets" (some $2 billion worth) funneled into the state treasury to fund wage increases for the powerful 1199 healthcare workers union. Surprise, surprise, this Democratic stalwart labor union, long a great friend of Assembly Democrats, subsequently endorsed Republican-Conservative Pataki in his 2002 re-election bid. The deal is explored and analyzed in this excellent article, "The Curious Conversion of Empire Blue Cross: In New York, it's all politics, all the time," by economist James C. Robinson in the journal Health Affairs (July/August 2003).
The new for-profit company that took over New York's Empire Blue, WellChoice, was subsequently purchased by WellPoint, a publicly traded for-profit California-based company. Wellpoint is one of the biggest health insurance companies in the nation.
Wellpoint's 2008 annual report shows that, while the company took it on the chin a bit in 2008 — what with the global financial meltdown and all — it still turned a profit of $2.5 BILLION on revenues of $61.3 BILLION for the year. That translated into net income per share of $4.79.
How does that stack up to other publicly traded companies? While Google ($15.80 net income per share) and big oil (ExxonMobil $8.69 per share) eclipsed most other companies' performance, Wellpoint's $4.79 net income per share was higher than any other publicly traded health insurance company I found by searching Google Finance. Other health insurer's net income per share stats: Coventry $2.54; Humana $4.26; United Health Group $2.40; Cigna $1.25; Molina $.58; Aetna $.46; Health Net $.34.
I have nothing against Wellpoint's shareholders. For all I know, I may — indirectly, at least — be among them, if one of our company's 401k mutual funds might hold shares in the corporation. But something is wrong with a health care system that allows private for-profit companies to turn a profit of $2.5 BILLION on the year and still hit its policy holders with 25 percent increases. Especially when the policy holders are already paying outrageous premiums. With that kind of an increase, our plan's family coverage premium will shoot up to more than $17,000 a year. And our company's contribution towards that premium — shrinking, proportionate to the total premium every year, because we can't keep pace with these kinds of increases and stay in business — is TAXED by the state as income to employees.
Our healthcare system is sick. And it's killing US.