CommunityFDL Main Blog

Health Insurers Report Profits Aplenty – to Pay Lobbyists

It’s reporting time for health insurance companies, and so, to the tape.

Aetna Inc. (AET) reports “…second-quarter 2009 operating earnings of $308.5 million, or $.68 per share, a 28 percent decrease from the prior-year quarter.” The company underestimated the explosion in medical costs, and set premiums too low (page 3). Not to worry, Wall Street:

Mark Bertolini, president, said, “We believe these increases in Commercial medical costs are largely the result of continued higher claim intensity, such as services rendered in a higher cost setting and more tests and procedures per visit, resulting in higher costs for emergency room, ambulatory, laboratory and preventive services. We are taking immediate actions to address these issues.

That doesn’t bode well for policy holders or doctors, now does it?

Premium revenues were up $738.7, 11.8%, primarily from membership growth and premium increases (page 4). It’s distressing to think that wasn’t enough premium increase. Aetna admits thats that it’s benefit payout ratios are high. It paid out about 86% of commercial premiums in benefits, compared to 89% of Medicare revenues, and over 92% of Medicaid revenues, but it promises investors it will bring those commercial payout ratios back down, maybe to the 80% range where they were in the second quarter of 2008. That will leave plenty of money for dividends and stock repurchases. And bonuses.

Cigna Corporation (CI), reports increased profits: $1.58 per share in the second quarter, up from the same year-ago quarter profit of $.96. Health care segment results were pretty good at $177mn, down slightly from the same year-ago quarter, but up from $154mn in the first quarter. CI says:

Premiums and fees in the second quarter 2009 decreased approximately 7% relative to second quarter 2008 primarily due to a decline in medical membership, partially offset by rate increases.

That decline in membership was 7.3%, 878,000 human beings. Better luck next quarter.

WellPoint, Inc. (WLP), reported that second quarter income was $693.5, down somewhat over the same year-ago quarter. A large part of that difference was the investment losses of $.07 in the second quarter, compared with losses of $.03 in the same year-ago quarter. A good bit of the reduction of revenues is lower membership. Here’s what WLP says about that:

Medical enrollment totaled 34.2 million members at June 30, 2009, a decrease of 1.1 million members, or 3.0 percent, from 35.3 million at June 30, 2008. The decline in membership was most significant in the Local Group business, which experienced a 734,000-member reduction from the prior year quarter, primarily due to in-group enrollment losses caused by the rise in unemployment.

WLP projects an increase in medical expenses of 8% for the rest of the year. It tells us that it intends to increase premiums enough to stay ahead of that trend, plus its costs. Page 2.

It looks like one big problem for these companies is loss of premiums because of unemployment. These companies must be salivating at the prospects of government subsidized premiums. Current profits are enough to pay for drinks and dinner for lobbyists and their dear dear Congressional friends.

Previous post

Bill Moyers Journal Interview with Wendell Potter - Rebroadcast Tonight

Next post

Health care reform -- you can't fix it until we understand it



I read a lot of books.