Sunday, March 07, 2010

Another "Evil Insurance" Meme

There was a column in the New York Times yesterday that at least one blogger supporting “health care reform” is quoting to support his position the health insurance companies are evil. The first caution is to remind him that this is the same paper that carries columns by Frank Rich, and which screamed warnings at us about the dire danger of WMD’s in Iraq. But to demonstrate a few examples of the incoherence of the column that is being used as “proof” that insurance companies are the problem:

To bolster the case for a far-reaching overhaul of the health care system, the Obama administration is seizing on a new analysis by Goldman Sachs, the New York investment bank, recommending that investors buy shares in two big insurance companies, the UnitedHealth Group and Cigna, because insurance rates are up sharply and competition is down.

Any broker who gave those reason for buying should be fired, and any buyer who bought for those reasons deserves to lose his money. How are the profits for those companies? According to their filings, UnitedHealth had an operating margin of 7.3% in 2009 and a net margin of 4.3%, which would indicate something less than a monopoly.

And officials will point to a finding that rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation.

Cherry pick a few 45%-50% raises, and admit that most are in the 15% range while phrasing it to hide that fact. And companies don’t base their prices on inflation, they base them on their actual costs, the ones they are actually paying. More on that in a moment.

The analysis could be a powerful weapon for the White House because it offers evidence that an overhaul of the health care system is needed not only to help cover the millions of uninsured but to prevent soaring health care expenses from undermining the coverage that the majority of Americans already have through employers.

But, of course, this bill is not “an overhaul of the health care system” at all. It does not affect hospital pricing or sale of medications; in fact it specifically omits anything that affects those costs to the medical consumer. This paragraph also talks about preventing “soaring health care expenses from undermining the coverage,” coverage being health insurance, which this bill does not make any serious effort to do. How does one use that to paint insurance companies as evil?

In the call, Mr. Lewis noted that “price competition is down from a year ago” and explained that his clients — mostly midsize employers seeking to buy health coverage for their employees — were facing a tough market, in which insurance carriers are increasingly willing to abandon existing customers to improve their profit margins.

[emphasis mine] His statement is certainly colorful; but it’s more inflammatory than informative. If you are losing money and seeking to reverse that into profitability then you are “seeking to improve your profit margins.” His statement would mean more if he would state what the margins are which they are seeking. In fact, they are seeking 7%, which is their historic average and which they have sunk below due to rising health care costs which they pay to hospitals and drug companies.

And they are not “walking away from customers.” They recognize that, in raising prices they will lose a certain amount of business, but they are unwilling to keep business which is not profitable. Hardly unreasonable, since they are a “for profit” corporation.

The problem is both with the journalist who writes drivel like this, making statements which are vague, uninformative or just plain inflammatory, and with the enthusiast who reads the piece through the lens of his ideology and believes that it proves his point, and then uses its misleading statements in support of a flawed argument like, “Health care costs too much so we need to cut the cost of insurance.”

Much like, "Cars cost too much, so we need more and smoother roads."

1 comment:

Anonymous said...

Touch e!

David Hoag

Post a Comment