Wednesday, September 22, 2010

Misplaced Opprobrium

Only in America can a company be excoriated for deciding to discontinue a product which is no longer profitable. Keith Olbermann labeled the decision “the insurance companies’ revenge,” as if a business taking revenge upon its customers was a concept that actually made any kind of sense. The alternative would be that the revenge was against the government, which makes even less sense. He brought on Wendell Potter to discuss the topic but I turned the television off because that man makes even less sense than does Keith Olbermann.

In introducing the topic Olbermann named the insurance companies who are stopping the sale of “child only” policies, and in each case he named the amount of profit each earned so far this year or in the last few months, stressing in an acid tone that it was in millions of dollars, and making it sound like a filthy amount of obscene profiteering. He’s not alone in this, it is standard practice in demonizing large corporations.

Does a 4.0% margin of profit sound obscene to you? If my investment was making 4% I would be looking for a better place to put it. I looked up the current profit levels of Aetna (5.7%), Humana (4.0%), Cigna (5.5%), United Healthcare (4.8%), and Wellpoint (5.0%) as reported to their investors. They might fudge the profit downward when reporting to IRS, but I hardly think they would do so to investors.

So, why did these companies discontinue child-only policies?

Congress mandated that insurers begin accepting sick children this year, while the requirement that all children be insured does not kick in until four years from now, so for a four-year period insurers will be required to accept enrollment of sick children without the offsetting benefit of the enrollment of children who are not sick. To say that represents a risky proposition would be a massive understatement. Looking at that statement, I would assume that insurance companies would be signing up almost nothing but sick children for the next four years.

The opprobrium should not be directed at insurance companies, but at Congress for creating the four-year gap between the mandate which makes unconditional coverage possible, and the requirement for unconditional coverage. It’s like creating the Pony Express to provide mail service in the western desert, and then saying that it has to operate for four years before it can be provided with any horses.

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