Wendell Potter, the courageous former Cigna VP turned whistleblower and freelance analyst for the Center for Public Integrity, has a piece on CPI’s website today called “Keeping an eye on insurance companies that refuse to pay claims.” Well, it’s an old story actually, about “profit-hungry health insurers” who are “refusing to pay for medically necessary care.” The nightmare real-life scenarios portrayed in this post are just atrocious. Potter ends with this:
Meanwhile, The Wall Street Journal reported on April 24 that Aetna’s medical loss ratio — “the amount of premiums used to pay patient medical costs” — fell to 80.4 percent during the first three months of 2014, down 81.9 percent a year earlier. That helped the company make $665.5 million in profits during the first quarter, an increase of 36 percent over the same period a year ago.
So what else is new? Last week, A.M. Best hosted a webinar on the “State of the Medical Professional Liability Insurance Market.”
The main take-away of the hour-long discussion by insurance insiders is that the medical malpractice industry has so much money leftover from when it price-gouged doctors during the last hard market (around 2002-2005) that for now, it actually can't raise rates on doctors no matter how much it really really might want to.
A.M. Best’s Charles Huber noted such facts as: Surplus rose 65% in last 5 years to 17.7 billion in 2012, and there is “still a fair amount of reserve redundancy” (meaning insurers put so much excess money in reserves during the last hard market - raising rates to cover it - that they are still getting rid of the excess).
One of the industry panelists claimed that the last hard market (around 2002-2005), which was the last time the industry hit doctors with astronomical rate hikes, was to cover a supposed “uptick in severity” 1999-2001. But, he said, “with the benefit of hindsight”(!) they know now that they “overshot the market a bit, as things have flattened out.” (Translation: we ignored everyone who was screaming at us that payouts were not going up, but we price-gouged doctors anyway, without any basis. Now we are swimming in money - still! )
And in terms of profits? "Fuhgeddaboudit!" According to the most recent profitability report from the National Association of Insurance Commissioners, the medical professional liability line of insurance has twice the return on net worth as the overall average for the entire property/casualty industry. Not only that. According to A.M. Best during last week’s webinar, not only has there been “remarkable profit” in the medical liability line of insurance, the industry has had seven years of underwriting profit – something completely unheard of in the property/casualty sector. (His words, not mine.)
Indeed, property/casualty insurers almost never have and do not expect to have an underwriting profit. In fact, they have only had an underwriting profit seven times in the last 44 years! (Let alone the last 7 years in a row.)
Patients and doctors, it might be time to unite.