Cigna executive proves case for public healthcare option

On Wednesday morning, Wendell Potter went to Congress to tell them what he knows. Not too many people noticed. It didn’t make the lead story on the nightly news, nor was it mentioned much around dinner tables, but Mr. Potter made the strongest case yet for the absolute need for a public healthcare option because he told the truth.

Until last year, Wendell Potter was a senior executive for Cigna, and he had a compelling story to tell.

Here are some of the highlights, taken straight from his testimony:

A few months after I joined the health insurer CIGNA Corp. in 1993, just as the last national health care reform debate was underway, the president of CIGNA’s health care division was one of three industry executives who came here to assure members of Congress that they would help lawmakers pass meaningful reform. While they expressed concerns about some of President Clinton’s proposals, they said they enthusiastically supported several specific goals.

Those goals included covering all Americans; eliminating underwriting practices like pre-existing condition exclusions and cherry-picking; the use of community rating; and the creation of a standard benefit plan. Had the industry followed through on its commitment to those goals, I wouldn’t be here today.
Today we are hearing industry executives saying the same things and making the same assurances.

This time, though, the industry is bigger, richer and stronger, and it has a much tighter grip on our health care system than ever before. In the 15 years since insurance companies killed the Clinton plan, the industry has consolidated to the point that it is now dominated by a cartel of large for-profit insurers.

He goes on to describe how Wall Street (what the GOP likes to call “the markets”) controls how our health insurance is managed.

To help meet Wall Street’s relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick. Insurers have several ways to cull the sick from their rolls. One is policy rescission. They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment. Asked directly about this practice just last week in the House Energy and Commerce Committee, executives of three of the nation’s largest health insurers refused to end the practice of cancelling policies for sick enrollees. Why? Because dumping a small number of enrollees can have a big effect on the bottom line. Ten percent of the population accounts for two-thirds of all health care spending.1 The Energy and Commerce Committee’s investigation into three insurers found that they canceled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims.

They also dump small businesses whose employees’ medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether–leaving workers uninsured. The practice is known in the industry as purging. The purging of less profitable accounts through intentionally unrealistic rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent to 38 percent since 1993, according to the National Small Business Association. Once an insurer purges a business, there are often no other viable choices in the health insurance market because of rampant industry consolidation.

One of the most offensive practices is the practice of pricing purges; that is, hiking premiums so high that an insured or group has no option but to terminate their policy.

Armed with a stockpile of new information on policyholders, new management and a shift in strategy, in 2000, Aetna sharply raised premiums on less profitable accounts. Within a few years, Aetna lost 8 million covered lives due to strategic and other factors.

And of course, let’s look at the bottom line:

…the collective medical-loss ratios of the seven largest for-profit insurers fell from an average of 85.3 percent in 1998 to 81.6 percent in 2008. That translates into a difference of several billion dollars in favor of insurance company shareholders and executives and at the expense of health care providers and their patients.

He saves the best for last: the fake insurance option.

…the number of uninsured people has increased as more have fallen victim to deceptive marketing practices and bought what essentially is fake insurance. The industry is insistent on being able to retain so-called–benefit design flexibility so they can continue to market these kinds of often worthless policies. The big insurers have spent millions acquiring companies that specialize in what they call–limited-benefit plans. An example of such a plan is marketed by one of the big insurers under the name of Starbridge Select. Not only are the benefits extremely limited but the underwriting criteria established by the insurer essentially guarantee big profits.

When you hear the insurance industry claim they want health insurance reform, don’t believe it. They want changes that increase their bottom line. There is only one pathway left to reform now that the single payer option has been taken off the table, and that’s a public plan. Don’t be fooled by the profiteers. Listen to Wendell Potter.

Tagged as: Aetna, Cigna, public option, Wendell Potter