Health Insurance Makes Huge Profits While Americans Cut Back
"Low levels" of medical care use, Americans' recessionary cut-backs, and lack of affordable health insurance are paying off big time for health insurance companies. Record profits going into a third straight year reported by insurance companies can be attributed to none other than hard working US citizens saving their money by way of cutting back on health care costs.
UnitedHealth Group, one of the health insurance industry's largest companies reported a hefty $1.04 billion profit in the fourth quarter of 2010, up 10 percent from the third quarter. This trend was not limited to this company, rather all insurance companies appear to be enjoying similar success with no signs of this slowing down in 2011.
The reason for the sudden robust profits? Americans are simply cutting back on their use of health care services. UnitedHealth Group and Cigna have both reported that as medical use has declined they have had less to pay out, which turns into profits for their companies.
“I am noticing my patients with insurance are more interested in costs,” Dr. Jim King, a family practice physician in rural Tennessee told the New York Times. “Gas prices are going up, food prices are going up. They are deciding to put some of their health care off.” Costly procedures such as knee replacements and dental work are more often being deferred by patients until times are more financially secure.
The problem is that, even for those who have health insurance, costly premium and deductibles mean that many still can't afford to use it.
Insurance Premium Hikes
Despite the skyrocketing profits, health insurance companies have continued to ask for premium hikes in 2011. In January California Blue Shield requested up to 59 percent increases in premiums and Regence Blue Cross of Oregon requested 22 percent increases in premiums for individual policy holders. The justification for these, Dr. Lonny Reisman, the chief medical officer for Aetna said to NYT, “I think there’s a real concern about a bounce-back, a rebound, in utilization [of health care].” Insurance companies base their premium hike request on predicted volume of future claims.
However, there has been speculation that the health insurance industry is simply bracing themselves for the financial impact of the health care reform laws which will go into effect in 2014. These companies will be forced to do away with per-existing conditions, cover adult dependents children up to age 26 and receive less reimbursement for costly procedures in order to provide more affordable health insurance to patients.
Cut-Backs Beneficial for All?
In some ways, the new attitude towards health care may be beneficial in the long run. The consumer mindset of Americans has shifted to conservative use of services. Dr. Rebecca Jaffe, a family practice doctor in Wilmington, Del., told NYT that her patients are now more interested in cost-saving on the medications that she prescribes. “Now, all of a sudden, they want the generic, when for years, they said they couldn’t take it,” she said.
This type of consumer approach to health care reduces unnecessary expenses on the health insurance industry – which in turn will hopefully translate into future cost-savings and more affordable health insurance for Americans. Hopefully.