Health insurance companies make huge profits at the expense of the people they cover

 

 

The fact of the matter is that health plan profits represent only three cents of the premium dollar.[1]

 

Approximately 86 cents out of every premium dollar goes directly towards paying for medical services such as hospital care, physician care, medical devices and prescription drugs.

 

Of the remaining costs, five cents goes to other consumer services, provider support, and marketing (including prevention, disease management, care coordination, investments in health information technology and health support).

 

Costs associated with government payments, regulation and other costs associated with administration (e.g., claims administration) comprise an estimated six cents.

 

Excessive profits and inflated executive salaries are the drivers for increased health care costs.

 

Contrary to opinion, administrative expenses, including profits, are the smallest driver of increases in health care spending in both the public and private sectors. Administrative expenses are higher than necessary, however, because of a lack of common standards.

America’s high and growing health care bill is driven by variations in access, quality and costs; consumer incentives to demand high levels of care; financial incentives for providers to deliver high levels of service; and demographic and economic factors.

According to the Congressional Budget Office, and CIGNA's own analysis, health care spending in the United States totaled nearly $2 trillion last year, divided almost equally between the government and the private sector. The Centers for Medicare and Medicaid Services (CMS) projects expenditures will increase 6.9% annually over the next decade, with private spending increasing 6.3% and government spending increasing 7.6%.

 

Another mistaken belief is that increases in the cost of health care are driven largely by administrative expenses in the private sector. In reality, according to an analysis of national health care expenditure data for the period 2000-2005, almost 95% of cost increases can be attributed to medical innovation, expansion of the scope of insurance coverage and benefits, general inflation, and the growth in chronic conditions. Administrative costs account for just 5%.  

 

Insurers are seen as one of the biggest barriers to real reform of the system. 

 

Insurers and health services companies, through our work with large employers, are actually one of the real drivers of change and innovation. CIGNA is promoting change with responsive programs that provide a personal and uncomplicated pathway to improved health, well-being and security for more and more Americans.

 

The greatest challenge is getting all stakeholders to pause and step back to take a comprehensive, macro view of the entire system. Adequately addressing the true underlying causes of rising costs and the uninsured must be addressed in fact-based discussions in order to find common ground on how best to provide affordable, quality health care for everyone. 

 

CIGNA is working with government, employers, health care providers and individuals to preserve the best of our current health care system while making the fundamental changes needed to achieve universal coverage.  

 

Neither the private sector nor government can do it all alone. Each stakeholder is best positioned and equipped to play certain roles.

 

The public sector can and should play a more active role by facilitating adoption of common regulatory, transparency, technology and transactional standards; enacting tort reforms (limiting medical malpractice awards); making needed changes to the individual insurance market; and providing a safety net for people who do not have the means to buy coverage. The private sector should continue to be permitted the flexibility to find innovative ways of responding quickly to the needs of the individuals and employers we serve.

 

The only reason health insurers want universal coverage is because they will make more money

 

With close to 45 million uninsured people in the United States and only 55 percent of adult patients receiving recommended care – despite national health care spending that represents 16 percent of our nation’s gross domestic product – the need for a sustainable solution has never been more acute. Universal coverage is the best way to address the spiraling costs of health care. Ultimately, the costs to treat individuals without coverage are shouldered by those who pay for coverage, and there are significant cost associated with the limited access uncovered people have to preventive care. We believe universal health care, along with the preservation of choice, is at the heart of health care reform.

 

Individuals without health insurance who get sick and cannot afford to pay for their illness will shift the costs to those with health insurance, either through higher taxes or higher premiums. This affects everyone. And by creating broader access to health care for millions of Americans, universal coverage should improve medical outcomes. Too often an individual without coverage delays seeing a health care provider until treatment is far more expensive and less successful than it would have been with early detection or prevention. Empowering people to be more in charge of their health care pays dividends for everyone.

 

A recent study by the independent consulting firm, Milliman, shows that those who have insurance must absorb the costs for treatment at hospitals and other facilities for those individuals who don’t, thus creating a payment gap to hospitals and physicians that privately insured employers and consumers must close through a “cost shift” or “hidden tax.” 

 

The study found that cost shifting:

The U.S. spends too much on health care and yet we are still behind other countries in key metrics.

While our nation’s health care system is far from perfect, it still offers the best combination of accessibility, quality, innovation, choice and affordability in the world. That does not mean, however, that we can’t learn from other systems around the world (as evidenced by our support for the creation of a Global Knowledge Exchange Network) and from the approaches of states across the country. For example, Massachusetts and California are employing different enforcement measures with the introduction of mandatory participation regulations. Public policy makers are learning from those real-world experiences. 

 

The one common characteristic of all national health care systems is that they ration care. Sometimes they ration it by denying certain types of treatment altogether. More often, they ration indirectly, imposing cost constraints through budgets, waiting lines, or limited technology. One million Britons are waiting for admission to National Health Service hospitals at any given time, and shortages force the NHS to cancel as many as 100,000 operations each year. Roughly 90,000 New Zealanders are facing similar waits. In Sweden, the wait for heart surgery can be as long as 25 weeks. In Canada more than 800,000 patients are currently on waiting lists for medical procedures[2]

 

Health insurers do not provide enough information to help individuals be savvy consumers

 

We are working with individuals and health care providers to prevent disease and keep people well... We are also addressing cost by improving the quality of health care and expanding access to care for existing customers and people currently without care. We are sharing our market experiences and insights with policy makers and thought leaders to assist in crafting sustainable solutions for our health care system.

 

Health care is increasingly high-tech and complex, but so are many other products and services that Americans purchase everyday without specialized expertise. A consumer does not need to know how an internal combustion engine works in order to buy a reliable car, or how silicon chips are manufactured before selecting a computer. When consumers have good information about product prices, quality and safety, they naturally gravitate toward the goods and services that offer the highest value for the lowest price.
 

There are numerous studies that show health-care consumers make decisions about price and quality. The current problem with the healthcare sector is that there isn’t enough good information available for consumers to make sound decisions about which healthcare provider or facilities offer the best value. But that’s rapidly changing as providers respond to increased consumer empowerment. CIGNA is an industry leader in advocating for that change, having introduced award-winning information tools for our individual customers that provide information on quality and cost of care and help people making decision on treatment options.
 

At the same time, patient advocacy programs and companies are springing up to help health-care consumers make informed choices. When consumers, rather than insurers or employers, control the money, markets naturally respond.
 

The U.S. health-care system represents one-seventh of the American economy, and is literally a matter of life and death for millions of Americans. Here's hoping that they'll be able to sort the facts from the fallacies in the coming debate.

CDHPs do not reduce costs, only shift them to employees

CIGNA's ability to engage consumers to improve health ultimately reduces costs for consumers, employers and the health care delivery system. In January 2009 we released the findings of a multi-year study that compared the claims experience for enrollees in the CIGNA Choice Fund(SM), our CDHP program, to costs for those enrolled in CIGNA's traditional health plans.

The normalized medical trend for individuals covered by Choice Fund plans was 13 percent less than for those enrolled for traditional plans. The study also shows lower medical trend for CDHP continues in subsequent years. People with CIGNA Choice Fund continued to receive recommended care at compliance rates that were similar or better than those covered by traditional CIGNA health plans.

Also, medical cost trend was substantially less for CIGNA Choice Fund customers with diabetes (20 percent less) or hypertension (18 percent less) than for individuals with either of those diseases in traditional CIGNA health plans. These individuals maintained similar treatment regimens regardless of whether they were covered by CDHP or HMO or PPO plans; suggesting that the lower cost trend are likely a result of better chronic disease management, rather than patients foregoing recommended care

Myth:

CDHPs cause people to forgo needed treatment

 

Our latest study explodes this myth. We looked specifically at the experience of those with two common chronic conditions hypertension or diabetes. Of the 22,000 individuals in our study who have either hypertension or diabetes:
Medical cost trend was substantially less for CIGNA Choice Fund customers with diabetes (20 percent less) or hypertension (18 percent less) than for individuals with either of those diseases in traditional CIGNA health plans.

These individuals maintained similar treatment regimens regardless of whether they were covered by CDHP or HMO or PPO plans; suggesting that the lower cost trend likely a result of better chronic disease management, rather than patients foregoing recommended care.

CIGNA Choice Fund individuals continued to receive recommended care at the same or higher levels as those enrolled in traditional plans in an evaluation of compliance with more than 300 evidence-based measures of health care quality (for example, women having a mammogram in the past 24 months or diabetes patients having a physician visit in the last six months).

In addition, preventive care visits for CIGNA Choice Fund individuals were 8% greater when compared to traditional plans and preventive care visits for second year CIGNA Choice Fund were 15% greater when compared to traditional plans.
 

Insurance companies don’t have any incentive to help people stay healthy because they don’t want to spend money on people who will just be changing health plans.  

 

Health plans are at the forefront of efforts to promote prevention and wellness. What’s more, they’ve been measuring their progress in improving quality of care and promoting prevention for over a decade. Other participants of the health care system have only more recently begun to focus on measuring quality and the outcomes of care. CIGNA has been a strong proponent at the national level for the implementation of national quality standards within the health care industry.

CIGNA HealthCare has a long history and record of success in seeking external validation of our quality improvement programs. We have made a substantial investment of resources to achieve accreditation of our health plans by the National Committee for Quality Assurance (NCQA)* and to participate in the Healthcare Effectiveness Data and Information Set (HEDIS®)* and the Consumer Assessment of Health Providers and Systems (CAHPS®)* to measure and report our quality and customer service performance. We are proud of our overall results. 

 

We continue to introduce new programs, such as health coaching and health assessment, that help individuals change their health behaviors to improve their health. 

 

  

*HEDIS® and Quality Compass® are registered trademarks of the National Committee for Quality Assurance (NCQA).

*CAHPS® is the Consumer Assessment of Healthcare Providers and Systems member survey that assesses member experience with care and service annually. It is the industry standard for comparing managed care performance and is used by employers, brokers, third parties.

*National Committee for Quality Assurance (NCQA), an independent not-for-profit organization and leading accrediting body for health plans in the United States.

 

 

 

 

---