An insider dissects the health insurance industry

November 22, 2010|Joshua Kendall

To understand the hearts and minds of Americans, the late scholar Jacques Barzun advised foreigners to learn the rules of baseball. That was in the 1950s. Today, a more fitting suggestion might be to study the curious manner in which we provide health care to our citizens. We remain the only industrialized country that links insurance with employment. Our unique blend of private and public plans governed by a crazy-quilt of federal and state regulations reflects our central ideological conflicts. While conservatives and liberals disagree violently about the specifics, both sides are convinced that virulent infections permeate the system.

In his compelling analysis of those ills, Wendell Potter, former director of media relations at the global health service company CIGNA, offers a blunt diagnosis. The health insurance industry, claims this whistleblower (whom President Obama cited in his health-care address to a joint session of Congress last year), is dominated by for-profit corporations that care much more about Wall Street that about patients.

With senior executives focusing on this core mission of serving investors, notes Potter, corporate balance sheets are healthier than ever. Between 2000 and 2008, as private insurers jacked up premiums by over 90 percent, payments to care providers grew by only 72 percent. The industry’s CEOs have looked out for number one. In 2007, the top dogs at the 10 largest publicly traded insurers took home in compensation a combined total of $118.6 million. Nor did the recent recession cause them much angst. Profits for the five biggest insurers totaled a staggering $12.2 billion last year, up 56 percent from 2008.

Potter doesn’t mince words. Based on his two decades in the industry, he is convinced that managed-care companies are fundamentally dishonest. In spellbinding Senate testimony in summer 2009, he explained how “insurance companies make promises that they have no intention of keeping, how they flout regulations designed to protect consumers . . . and how they ‘purge’ small businesses when their employees’ medical claims exceed what underwriters expected.’’