Center for American Progress Action

When Insurance Companies Win, the American People Lose
Report

When Insurance Companies Win, the American People Lose

Insurance companies are fighting to kill health care reform to protect their profits, their abusive practices, and their market monopolies.

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Insurance companies are fighting to kill health care reform to protect their profits, their abusive practices, and their market monopolies.

Today, insurance companies are spending millions, issuing misleading reports, and driving an “11th-hour campaign” to kill health care reform.

Insurance companies spent $2.6 million lobbying the government in the last three months alone—nearly $4,500 per member of Congress.

With insurance companies raising premiums faster than wages and inflation, one insurance company CEO—Angela Braly of WellPoint—admitted that insurance companies are putting profits ahead of people, saying, “we will not sacrifice profitability for membership.”

In 2008, the insurance industry overall made $25 billion in profits, and health insurance CEOs were paid $690 million.

Just like the 1990s, insurers are trying to kill reform by deploying swarms of lobbyists and misleading the public with bogus reports in order to protect their profits, their abusive practices, and their market monopolies.

Insurance companies are afraid of competition, and they want to protect their monopolistic strangleholds in most state markets.

According to the Associated Press, “Several studies show that in lots of places, one or two companies dominate the market,” and that opposition to insurers’ monopolistic practices ranges across the political spectrum. “Even lawmakers opposed to a government plan have problems with the growing clout of the big private companies,” says AP.

According to the American Medical Association, 94 percent of the commercial health insurance market is “highly concentrated.”

In 21 states, one carrier alone dominates more than half of the market. And in 39 states, two carriers together control more than half the market.

Insurance companies want to continue their abusive practices, such as finding any reason to cancel your coverage when you get sick.

Today, insurance companies systematically look for any reason to cancel people’s coverage once they file a claim—within the industry, this practice is known as “rescission.”

Rescission is widespread within the insurance industry. A House subcommittee investigation found that the three top insurers dropped at least 20,000 people to save themselves $300 million. And one company, WellPoint, has a list of 1,400 different conditions that could trigger an investigation.

Many hard-working, premium-paying Americans are suffering under insurance companies’ abusive practices:

Abusive practices like these are part of insurance companies’ relentless drive to increase their profits at all costs—one former insurance industry executive admitted that insurance companies try to pay as few bills as possible in order to drive up their stock values.

Insurance companies’ abusive practices are especially harmful to women.

Today, women pay up to 48 percent more in premiums than men for the same coverage on the individual market, and insurance companies are completely free to continue this practice in all but 12 states.  Within the industry, this practice is known as “gender rating.”

Many insurance companies don’t provide comprehensive maternity coverage. When defending the practice, one insurance official called pregnancy a “matter of choice.”

Many insurance companies classify C-sections as a “pre-existing condition.” One subsidiary of United Health (one of the biggest insurance companies in the nation) “simply rejects” women who have had C-sections.

Insurance companies will even find reasons to deny care to rape victims.

In eight states and the District of Columbia, it is perfectly legal for insurance companies to deny coverage to victims of domestic violence. Insurance companies definitely take advantage of this loophole, with one industry official arguing that covering a victim of domestic violence would be akin to covering “a smoker who doesn’t stop smoking.” [USA Today, 6/2/94]

  • In 2006, 10 Senate conservatives voted to kill a proposal that would have ensured coverage to victims of domestic violence, including Sens. Lamar Alexander (R-TN), Richard Burr (R-NC), John Ensign (R-NV), Mike Enzi (R-WY), Bill Frist (R-TN), Judd Gregg (R-NH), Orrin Hatch (R-UT), Johnny Isakson (R-GA), Pat Roberts (R-KS), and Jeff Sessions (R-AL) [Congressional Quarterly Committee Coverage, Senate Health, Education, Labor and Pensions Committee Markup, 3/15/06]

Seniors and early retirees are hurt by insurance companies charging them as much as 11 times more for coverage based on their age.

The number of employers offering insurance to early retirees has fallen by half in the last 20 years, shifting more and more early retirees into the individual market, where they are at the mercy of the insurance companies.

On the individual market, insurers can charge early retirees as much as 11 times more than younger people for the same coverage—a process known as “age rating” in the industry.

  • Congressional reformers are trying to rein in this practice, but insurers are lobbying furiously against their efforts.

In the vast majority of states (41), there is no limit on how much insurance companies can charge early retirees for individual premiums.

Insurance companies even take advantage of seniors through Medicare Advantage plans.

Right now, the government pays private insurers in Medicare Advantage 14 percent more than what it pays insurers under traditional Medicare. The overpayments to insurers result in higher costs for beneficiaries in traditional Medicare.

In addition to receiving wasteful overpayments, insurance companies have a long track record of trying to take advantage of seniors through the Medicare Advantage program. Fully two-thirds of insurance companies who provide coverage through Medicare Advantage have been cited for violations related to how they enroll or deal with beneficiaries. [Tampa Tribune, 6/27/07] For example:

  • In Florida, WellCare was forced to pay $90 million to settle claims that it artificially boosted profits by shortchanging $40 million from Florida agencies—including the Florida Healthy Kids Corporation. [Tampa Tribune, 6/30/09]
  • In Illinois, Humana was forced to pay half a million dollars in fines for trying to put seniors in “unaffordable or unnecessary programs.”

Download this memo (pdf)