The Center for Public Integrity

For health insurance executives, there is no scarier word than "disintermediation." It’s a fancy word that means eliminating the middleman, and those executives know that to many folks, they are the middlemen who all too often stand between patients and their doctors.

Now a small but growing number of doctors are figuring out that they and their patients can do quite well without the middleman. If this nascent trend catches on, insurance executives might soon discover that they have been disintermediated, at least as far as the delivery of primary care is concerned.

No other country in the developed world allows insurance companies to control its health care system like the United States does, and the fact that we do is one big reason why America spends so much more on health care than anyone else on the planet.

In a 2007 McKinsey & Co. report titled “Accounting for the Cost of Health Care in the United States,” the authors, who had studied numerous health care systems abroad, noted that 30 percent of U.S. health care costs are spent on administrative functions unknown in other countries.

Not only do U.S. insurance companies themselves devote up to a fifth or more of the premiums they collect from us on overhead, they also make it necessary for providers and employers to maintain large staffs doing nothing more than dealing with insurance companies all day.

Citing a 1999 study, McKinsey said the United States could spend $209 billion less every year by eliminating administrative expenses that add little if anything to quality of care. And that was in 1999 dollars. The savings would be much greater today.

Regulators in 38 states last year reviewed all health insurance companies’ planned increases in premiums before the rates took effect, according to a Government Accountability Office survey that also found the reviews ranged from detailed examinations to a cursory glance at rate justifications.

While some state insurance regulators had the power to approve or reject all rate filings by health insurance companies in 2010, others could review rate increases only after they took effect, the GAO survey said. Still others like Illinois and Louisiana had little authority over premium increases last year.

Premiums paid by Americans for health insurance from their employers more than doubled in the past decade, according to the Kaiser Family Foundation. iWatch News columnist Wendell Potter, a former health insurance industry executive, described in a May analysis how U.S. health insurance companies demand more transparency from doctors and hospitals but have resisted efforts to require their own industry to share more information about what is behind premium rate increases.

With the passage of the health reform law last year, the Health and Human Services Department (HHS) is awarding $250 million in grants over five years to help state regulators do a better job of overseeing insurers’ rate increases. The survey found that 41 state insurance regulators are using grant money to make changes such as seeking state legislation to gain more authority over rates, hiring actuaries, and improving their technology to analyze rate filings.

Other changes underway to improve rate reviews, according to the GAO survey, included:

Three of the biggest health insurers have announced quarterly earnings in the past few days. If Americans were able to eavesdrop on what executives from those firms tell their Wall Street masters every three months, they would have a better understanding of why premiums keep going up while the number of people with medical coverage keeps going down.  

It only takes three words, when you get right down to it, to describe the real MO of those folks: profits over people.

CIGNA and Humana are scheduled to report earnings this week. The three companies that have already spoken — UnitedHealth, WellPoint and Aetna — earned a combined $2.51 billion from April through the end of June, more than analysts expected. On a per share basis, their earnings were up more than 17 percent on average compared with the second quarter of 2010.

Those results were no anomaly. The big for-profit health insurers have been blowing analysts’ expectations out of the water for several quarters in a row, even as the country struggles to recover from the recession and the number of Americans without coverage — one out of every six of us — continues to rise.

Based on their strong performance during the first half of this year, UnitedHealth, WellPoint and Aetna have all have raised their profit forecast for 2011. In other words, they expect to earn far more this year than last year and far more than even the most hopeful investors and analysts had anticipated.

If opponents of health care reform could view the grant money in the Affordable Care Act as an investment in our children rather than wasteful spending, I believe at least some of them would eventually accept that we’re better off with the law than without it.

I’d be especially confident if they took the time to visit some of the community facilities that will be able to meet the health care needs of thousands more Americans as a result of those grants.

Earlier this month, the Obama administration announced awards of $95 million to 278 school-based health center programs across the country. The grants—the first of  $200 million worth of awards between now and 2013—will help clinics expand and provide more medical services at schools nationwide.

According to the Departments of Education and Health and Human Services, the school-based programs receiving the first grants currently serve nearly 800,000 patients. The grant money will enable them to increase their capacity by more than 50 percent, serving an additional 440,000 patients.

One of the recipients is the Family Health Centers of San Diego, which by itself last year served more than 161,000 patients, many of them children, through 600,000 visits at 30 locations and three mobile medical clinics.They will receive $500,000, the maximum award, to, among other things, establish a permanent clinic at Rice Elementary School in Chula Vista, a community with many uninsured families and a high unemployment rate.

Family Health Centers will also use the money to help transition to electronic health records and to replace aging equipment and update technology at one of its facilities at another school, Sherman Elementary.

In announcing the first recipients of this federal money, Secretary of Education Arne Duncan said the grants “will make it a lot easier for working moms and dads to help get their children the health care they need and deserve.”

Health care reform advocates in Colorado are not the only ones wondering what happened to the Democratic governor they elected in part because of his commitment to health care reform.

Advocates in Connecticut are likewise feeling betrayed by a governor who suddenly seems to be the insurance industry’s new best friend.

I wrote last week that at least two consumer organizations in Colorado are calling for the resignation of one of Gov. John Hickenlooper appointees to the newly created board that will oversee the state’s health care exchange; the exchange is a virtual marketplace, mandated by the federal reform law, where individuals and small businesses can shop for health insurance.

Instead of ensuring that the governing board of the Colorado exchange be controlled by people without ties to the insurance industry, Hickenlooper shocked reform advocates by naming executives of two of the state’s largest insurers to the board,  along with an executive of a firm that does almost all of its business with insurers. Legislative leaders also appointed industry executives to the board. All told, five of the nine board members are either employed by insurers or are closely allied with them.

Nearly 2,000 miles to the east, many reform advocates in Connecticut are also feeling buyer’s remorse after watching Gov. Dan Malloy seemingly abandon his campaign pledge to more aggressively oversee private insurers as well as his  support for a proposed state-based public insurance option called SustiNet.

Malloy spoke favorably of SustiNet when he was running for governor last year and even picked State Comptroller Nancy Wyman, who served on the board that developed the SustiNet plan, as his running mate for lieutenant governor. Both were elected.

The insurance industry made it abundantly clear this week that it is in the driver’s seat—in both Washington and state capitals—of one of the most important vehicles created by Congress to reform the U.S. health care system.

The Affordable Care Act requires the states to create new marketplaces— “exchanges”—where individuals and small businesses can shop for health insurance. In the 15 months since the law took effect, insurers have lobbied the Obama administration relentlessly to give states the broadest possible latitude in setting up their exchanges. And those insurance companies have been equally relentless at the state level in making sure governors and legislators follow their orders in determining how the exchanges will be operated.

When Health and Human Services Secretary Kathleen Sebelius announced the proposed federal rules governing the exchanges on Monday, insurance executives must have been doing high fives all over the country.

Insurers had several main objectives. First, they did not want the feds to require states to negotiate with health plans on price and benefit design. And they did not want plans that failed to meet certain criteria to be excluded from the exchanges.  Insurers did want the states to feel free to appoint people with ties to the industry to run the exchanges.

Consumer advocates didn’t think they had much of a chance of denying insurers their first two wishes. But they hoped HHS would at least agree that allowing health insurance executives to serve on exchange boards would create a ‘foxes-guarding-the hen-house’ disaster that lawmakers never intended.  

Nowhere are consumer groups more dismayed by the Obama administration’s proposed rules than in Colorado, where lawmakers passed a bill that explicitly prohibits the state exchange from negotiating with health plans and where the governor and legislators have just packed the exchange board with industry executives and allies.

Want to be an entrepreneur but also be certain you’ll have health insurance?

Good luck with that. You might seriously consider moving to Denmark or Canada. Those countries have not only achieved universal health care coverage for their citizens — coverage that’s not tied to employment — but they have also moved ahead of the U.S. in the Small Business Administration’s ranking of entrepreneurial performance worldwide.

Contrast that with our situation stateside. Many of America’s best and brightest are locked in soul-killing corporate jobs because of this country’s employer-based health care system. A lot of them undoubtedly would love to make a break from their corporate jails and start their own businesses. But they won’t —especially if there’s a family to support — because they fear losing health care benefits and not being able to find decent coverage on their own.

When it comes to recruiting the best talent, big corporations have a hefty advantage over small business owners in this country.  With hundreds and often thousands of employees, large firms can spread the risk of insuring their workers and offer coverage with richer benefits and lower premiums than small businesses. And most big employers are able to pay a larger portion of their workers’ premiums than small employers. Big companies that offer health care benefits also have historically enjoyed tax advantages that have not been available to small firms.

This is one of the reasons the U.S. Chamber of Commerce, which represents the interests of big business in Washington, was so adamantly opposed to the Affordable Care Act, which will begin to at least level the playing field for small firms.

On behalf of Grigor and Hilda Sarkisyan, I would like to invite Republican Rep. Phil Gingrey of Georgia to attend the 21^st birthday celebration of the Sarkisyans’ only daughter, Nataline, this coming Saturday, July 9, in Calabasas, Calif.

Gingrey could consider it a legitimate, reimbursable fact-finding mission. He clearly needs to have more facts about the U.S. health care system before he starts talking about death panels again.

Gingrey seems determined to keep alive the lie that the Affordable Care Act (a.k.a., Obamacare) will create government-run death panels in the Medicare program.

Sarah Palin started the death panel fabrication when she claimed during the health care reform debate that a proposal to allow Medicare to reimburse doctors for talking to their patients about advance directives would be tantamount to establishing death panels deep in the federal bureaucracy.  So many people believed her lie that Democrats felt they had no choice but to strip that provision from the final bill.

Taking a page from Palin’s playbook, Gingrey is now alleging, also falsely, that excising that provision didn’t do the trick, that the bill signed by President Obama still creates death panels somewhere inside the federal government. He says a new board created by Congress to look for ways to reduce Medicare spending would have to operate those panels. .

“Under this IPAB (Independent Payment Advisory Board)… that the Democrats put in Obamacare, where a bunch of bureaucrats decide whether you get care, such as continuing on dialysis or cancer chemotherapy, I guarantee you when you withdraw that the patient is going to die,” Gingrey said recently. “It’s rationing.”

No, Congressman, that’s not true. And I suspect you’re well aware that the charter creating the board forbids it to ration care.

One of my favorite bumper stickers reads, “If you’re not outraged, you’re not paying attention.”

That’s sort of how I feel about the health care debate. If more Americans paid attention to the fate of neighbors and loved ones who have fallen victim to the cruel dysfunction of our health care system, they would see through the onslaught of lies and propaganda perpetrated by special interests profiting from the status quo.  

Since I started speaking out against the abuses of the insurance industry, I have heard from hundreds of people with maddening and heartbreaking stories about being mistreated and victimized by the greed that characterizes so much of the profit-driven American health care system.

Many other people send me links to articles or broadcasts they have seen. When I worked in the insurance industry, we called them “horror stories,” and for good reason. The circumstances people often found themselves in were nightmarishly horrible. As an industry PR guy, my mission was to keep as many of those horror stories out of the media as possible.  We didn’t want the public to know.

It occurred to me recently that Americans are not sufficiently outraged because they either don’t hear these stories or, if they do, don’t believe how commonplace they are or that anyone they know could experience the same misfortune. Or they might hear that more than 50 million Americans don’t have insurance because they can’t afford it or, in many cases, can’t buy it even if they can afford it, but they don’t stop to think that real human beings make up that abstract 50 million figure.

The reality is that these stories are indeed commonplace. Almost all of us—regardless of our age, income, job or political affiliation—are just a layoff or plant closure away from being uninsured, or a business decision beyond our control from being underinsured, or an illness away from being forced into bankruptcy and homelessness.

More and more Americans are falling victim to one of the most insidious bait-and-switch schemes in U.S. history. As they do, health insurance executives and company shareholders are getting richer and richer.

This industry-wide plot explains how health insurers have been able to reap record profits during the recent recession as the ranks of the uninsured and underinsured continue to swell.

It also explains why the insurance industry and its allies are pulling out all the stops to kill a measure in the California legislature that could protect state residents from losing their homes and being forced into bankruptcy if they get seriously sick or injured.

On June 2, the California Assembly passed AB 52, a bill that would give state regulators the authority to reject excessive health insurance rate increases. Similar legislation has been introduced in other state legislatures, but nowhere are the stakes higher than in California—not only because AB 52 would allow the insurance commissioner to turn down requests for unjustifiably high rate hikes, but also because it would enable the commissioner to reject increases in deductibles as well. 

Over the past several years, insurers have been implementing a strategic plan to “migrate” (their term) all of their policyholders out of traditional indemnity and managed care plans into so-called “consumer-driven” plans, which feature high deductibles. They have been luring people into these plans by setting premiums for high-deductible plans lower than HMOs and PPOs, at least initially.

At first glance, these plans appear to be a good deal to a lot of people.  Not only are the premiums relatively more affordable, but also the deductibles usually appear to be manageable—again, at least at the outset.