For-Profit Health Insurance Companies

 The Affordable Care Act is a market-driven approach to tackling America’s health care problems. As such, the ACA is restricted in its ability to fully reform health care in America.

Unlike other industrialized nations, the United States’ health care system is centered around for-profit insurance companies and a mixture of for-profit and limited non-profit health care options. Dependency upon for-profit insurers contributes to the U.S. having the most expensive health care system in the world, consuming nearly 20% of the nation’s GDP. By comparison, the public health insurance systems of the world’s other industrialized nations are more effective and less costly. The goal of the ACA is to bring more efficiency to America’s health care system while improving the quality of patient care.

Prior to the enactment of the ACA, some 35,000,000 Americans were uninsured due to insurance rates rising dramatically for many years. Of those who were insured, some 40,000 were dying annually due to the refusal of their insurance companies to pay for life-saving treatments for their customers. While allowing tens of thousands of their paying customers to die in order to increase corporate profit margins, insurance companies were collectively paying their CEOs hundreds of millions of dollars in compensation annually.

The Affordable Care Act is designed to put an end to insurance company death panels, prevent exorbitant industry profits at the expense of customers, and provide more affordable policies for individuals and families through individual subsidies. When fully enacted, the ACA is intended to ensure that approximately 95% of Americans will have health insurance.

One way in which the ACA is ensuring reform in the health care industry is by regulating what is known as the “Medical Loss Ratio,” that is, the percentage of customers’ premiums that a given insurance company pays back in the form of customer medical benefits. In 1993, insurance companies typically spent 95% of customers’ premiums on medical benefits. By 2009, many insurance companies were routinely denying policy claims in order to ensure that no more than about 80% of premiums were put back into medical benefits, while plowing the excess profits into executive salaries.

During the same time frame, Medicare reinvested 97% of premiums into medical benefits. Yet in 2009, health insurance corporations posted a 56% average increase in profits (one posted a 91% increase) while dropping coverage for nearly 3,000,000 Americans.

Unfortunately, the inherent shortcomings and problems of for-profit health insurance have also played out in the history of Medicare Advantage, a for-profit operated (and federally subsidized) alternative to government-sponsored Medicare. The for-profit insurance companies operating Medicare Advantage have spent tens of billions of Medicare (tax payer) dollars on executive salaries and executive retreats in Cancún, as well as enormous sums on marketing designed to lure more customers away from Medicare to the privately administered Advantage plans. At the same time, studies have revealed that the supposed benefits offered by Advantage are window dressing designed to maximize profits for the for-profit insurance companies.

Now, the ACA mandates that at least 80% of profits be utilized for medical benefits, in addition to requiring reforms in the delivery of Medicare and Medicaid.

Major For-Profit Insurance Companies in the U.S. include:

  • Blue Cross/Blue Shield
    Founded in the 1920s, Blue Cross/Blue Shield (BCBS) is one of the oldest health insurance companies in the United States. It is also the largest health insurance company in the U.S., providing services to about 1/3 of insured Americans. In some states, BCBS effectively has a monopoly on health insurance.
  • United Health Group
    United Health Group, founded in the 1970s, offers health insurance plans to businesses and employers.
  • Aetna
    Offering health insurance plans and services to individuals, families, and government employees, Aetna (founded in the 1860s) began offering group consumer plans in the 1930s.
  • Humana
    Humana specializes in offering group health insurance plans to employers.
  • TriCare
    TriCare focuses on offering insurance to military servicepersons and their families.

In addition to the major pro-profit health insurance companies, many new companies and co-ops, often state-based, have recently been established under the Affordable Care Act.

For-profit health insurance coverage varies from state to state.

For More Information:

U.S. Health Care: World’s Most Expensive
Money-Driven Medicine (Book)
The Truth About Drug Companies (Book)
Medical Loss Ratio Statistics
More Medical Loss Ratio Information
Health Care Industry CEO Compensation
ACA Medical Loss Ratios

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