The Health Of Our Care – me, part 2

Ronald Williams, Chairmen & CEO, Aetna, in an interview with Nightly Business Report Correspondent Darren Gersh on PBS (Thursday, March 4, 2010): 
Gersh – Are you charging people up to 40% more for their individual insurance?
Williams – The answer is by and large no, we don’t see those kinds of increases.

Well, I guess I’m one of the exceptions. Or, in Mr. Williams’ mind, does an increase of 35% not count as large?

I had planned on introducing someone else’s story today, but instead I’m updating my story. I was just notified that my individual health insurance premiums will increase to $1204 per month, beginning April 1.

Now, I know I said in the last post that this is not the place for my political opinions. I plan to stick with that, but I admit at the outset that I’m not sure I can manage that today. I am too filled with justifiable, righteous anger. I plan to write the facts as I have found them, but I AM FILLED WITH JUSTIFIABLE, RIGHTEOUS ANGER! And I’m struggling to understand.

I am a lucky person. I’ve been able to afford very good insurance with a company that has actually paid for the care they promised me. I was one of the good stories of healthcare in America.

But now, I am stunned. I am angry. I am typing with tears streaming down my face. How does a person deal with this kind of increase?  Every solution I come up with is just temporary, cannot be sustained over the long term, or is simply not enough. It’s $314 more a month – every single month. That’s $3,768 more a year, for a total of $14,448 for one year of health insurance.

I’m really a frightfully boring and responsible kind of person. I pay my bills on time, don’t buy things I can’t afford, always contribute to my retirement account, and put any extra money into savings. Isn’t that what we’re supposed to do?  That may change very soon.

I’ve spent the morning reading reports, trying to understand. The men who run Aetna are not inherently evil; they have reasons for their rate increases; they have reasons for every action the company takes. So I’m trying to figure it out. I understand that healthcare costs continue to rise. According to the US Department of Labor’s Consumer Price Index for urban areas, medical care increased 3.5% over the last year. Hospital and related services increased 6.8%. Last month, Aetna announced that fourth quarter earnings fell 15%, reflecting lower earnings in their Group Insurance business.

How do we get from a 15% loss in earnings and 6.8 & 3.5% increase in medical care costs to 35% increase in premiums? And the largest increases appear to fall to individual plans like mine.

Ron Williams, Chairman & CEO of Aetna flatly denies in his interview on the Nightly Business Report that Aetna is shifting costs from the big guys (large group plans) to the little guys (individuals with no negotiating power). But if Aetna’s earnings fell because of lower earnings in Group Insurance, and my individual plan has just gone up 35%, how is that statement true?

While rummaging around the internet searching for answers, I found some other interesting numbers. Related to my increase, or not? I don’t know.

Aetna Inc. has spent well over $11 million in the last 5 years on lobbying in Washington (that does not include donations to individual candidates or industry organizations), according to the Center for Responsive Politics. In 2009, while Aetna was losing money, they increased lobbying spending to $2,824,955 (that’s equal to 8,997 months of my increase).

2008 was the most recent year I could find compensation records for Aetna Inc. Mr. Williams’ total compensation was $24.3 million (that’s $2,025,000 a month, or $467,307 a week, or $66,575 per day). That compensation package was up 5.6% over his 2007 earnings. And that was 16% higher than 2006, which was 187% up from 2005 (just $6.9 million). Joseph Zubretsky, CFO & Executive VP earned $5.6 million in 2008, up 41% over his compensation for 2007. And Mark Bertolini, President, made $7.9 million in 2008, a 54% increase from the year before. (source: Morningstar)

Just curious: how many of you had increases like those? I didn’t. But my income is derived from music, fitness, and a little real estate, so I’ve seen only cuts. One orchestra I play for is trying to convince me that my colleagues and I should work for less than our 2005 wages… if only I could pay Mr. Williams my premium rate from 2005.

I know that total compensation is complex, including all sorts of stock options and “other compensation” in addition to salary. And I can’t say whether these salaries are justified or not. I assume these guys work very hard at a very complex job for that compensation. I do wonder though, if the company is losing money, do they give back any of that compensation? I mean, seems like they’re kind of failing at their job, doesn’t it? – But that’s for the shareholders to decide.

I really am not trying to beat up on Aetna or Mr. Williams. I said in the last post that the company has treated me fairly and always honored it’s contractual obligations.  I am just trying to understand a 35% increase in my premiums in light of the numbers I’ve found. Maybe I’m looking at the wrong numbers. I am not an economist. I’m sure I’m missing very important pieces of this puzzle – but I’m not understanding how all this makes sense. I’m just not understanding how it adds up.

What I do know is that, like me, very many people in this country are seeing their individual premiums go up in astounding amounts. And I do know that many will not be able to absorb the cost. Should they start selling off assets? Take out another mortgage on the house? Use their savings to pay the bills (how long will that last)? Tell their kid he can’t stay in college? Run up credit card debt? Or drop their insurance and hope they don’t get sick? But what if they’re already sick?

Insurance executives are fond of saying that the American people don’t really understand the cost of healthcare – we don’t have enough “skin in the game.” I assure you that those of us who are spending 30, 40, 50% and more of our earnings on healthcare have plenty of skin in the game! Mr Williams, I suggest to you that until you are spending in excess of $10 million every year for your own personal healthcare, or until you are deciding whether to default on your mortgage or pay for healthcare, you have far less skin in this game!

To you, the shareholders of Aetna and other insurance companies, what’s your plan? Are you thinking of shorting your insurance stock? How good a long-term investment do you think this really is?  If your company is bankrupting the people of this country, how sustainable is this business model, long-term?

And to you in Washington, spend some time in my life, or the lives of your constituents, spend a few months putting over 50% of your income toward your insurance. Make the choices so many of us are, and then tell me that this is not a crisis! (and remember, researchers at Harvard found that 62% of all personal bankruptcies filed in 2007 were caused by healthcare costs – undoubtedly, that number has gone up significantly since then.) Reasonable people can disagree on details, but the status quo is bankrupting the people of this nation. It cannot be sustained. Work out your differences and do your job!

It seems I have failed utterly at keeping my opinions out of this. It was my intention to simply tell some stories and leave politics and ranting for other realms. But I am angry and I am worried. I worry about my own health and my economic health. And I worry about the heath and economic wellness of the people of this country – not the executives, not the politicians – but the people who work and pay taxes, who make this country run, who buy and sell things, who want to educate their children and have a roof over their heads – I worry about all the rest of us.


(I’m curious what kinds of increases others are seeing around the country. Send me an email:

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4 Responses to The Health Of Our Care – me, part 2

  1. wsxwhx717 says:

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  2. julie says:

    Just to follow up: I’ve been checking my records. My doctors have not changed what they are charging for the past 3 years (I didn’t check back further than that). The lab costs have not increased over the past year. There was an increase in costs for my heart scans (I was required to have regular tests because some of the drugs I have had carry a risk of heart damage. I am no longer getting those tests.) That increase was $15 over the last 3 years.

  3. deaniac83 says:

    Julie, I am so sorry to hear about what’s happening with you. The fact of the matter is that the large group health insurance market is both regulated and has leverage. The individual market has none of that. The margins insurance companies make on administrative costs and profits in the individual market are up to 40% off your premium dollars. The reality really is that insurance companies, without tougher regulation and more competition, will continue to price more and more people out of the market.

    Not only have insurance companies steadily increasing the overall portion of your premium dollars they put into profits and administrative costs, but the individual market clocks in as the worst of those practices:

  4. julie says:

    Thanks, Deaniac83. What’s most upsetting is that I’m not the only one (as you know). Many others are being hit with increase just as large, and many of those are opting to drop coverage – they simply can’t afford it – and hope for the best.
    And thanks for the link.

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