Monday, November 02, 2009

ObamaCare: Demagoguing the Insurance Companies

From Jeff Jacoby in the Boston Globe:
TWO THINGS supporters of a government-run “public option” for health insurance know for sure. One is that private health insurers are raking in obscenely high profits. The other is that only a government rival can force them to compete on price.

In a clever new commercial featuring Heather Graham as an agile sprinter named “Public Option,” the left-wing pressure group MoveOn combines both themes, describing insurance companies as “lazy” and “bloated from the profits of raising our health care costs sky-high.” Why, it asks, should anyone resist the competition a public option would generate? After all, “competition is as American as apple pie.” In a less amusing print ad a few weeks ago, MoveOn charged that “insurance companies are willing to let the bodies pile up, as long as their profits are safe.”

President Obama also attacks health insurers as avaricious profiteers.

“The insurance industry is making this last-ditch effort to stop reform,” he declared on Oct. 16, “even as costs continue to rise and our health-care dollars continue to be poured into their profits (and) bonuses.” When he addressed Congress in September, Obama insisted that only a public option will “keep insurance companies honest.” On the White House Blog, ObamaCare opponents are accused of “fighting to protect insurance industry profits.”

Indeed, there is no shortage of voices characterizing health insurers as greedy villains. Earlier this year, House Speaker Nancy Pelosi praised her party for highlighting “the immoral profits being made by the insurance industry.” On CNN last week, Ohio Senator Sherrod Brown demanded a public option “so the insurance industry can’t continue to game the system and discriminate” against women and the disabled — tactics insurers have used to “quadruple their profits in the last five years.” If quadrupled profits don’t seem rapacious enough, the union-backed Health Care for American Now! ups the ante, claiming, according to the AFL-CIO’s news blog, that “during the past five years, health insurance company profits have soared by 1,000 percent.”

Outbidding them all is Senate Majority Leader Harry Reid. Health insurance companies “are so anti-competitive,” he said last month, “because they make more money than any other business in America today.”

To such overheated agitprop, the only useful response is a cold shower of facts, and the Associated Press supplied a timely one last week. For all the impassioned talk about obscene profits and bodies piling up, AP’s Calvin Woodward reported, “health insurance profit margins typically run about 6 percent” of revenues, a return “that’s anemic compared with other forms of insurance and a broad array of industries.”

87 cents out of every premium dollar pays for medical services, according to a PriceWaterhouseCoopers study for America’s Health Insurance Plans. Insurance company profits account for just 3 cents.

On the Fortune 500 list of top industries, health insurance companies ranked 35th in profitability in 2008; their overall profit margin was a mere 2.2 percent. They lagged far behind such industries as pharmaceuticals (which showed a profit margin of 19.3 percent), railroads (12.6 percent), and mining (11.5 percent). Among health insurers, the best performer last year was HealthSpring, which had a profit of 5.4 percent. “That’s a less profitable margin,” AP noted, “that was achieved by the makers of Tupperware, Clorox bleach, and Molson and Coors beers.”

For the most recent quarter of 2009, health-insurance plans earned profits of only 3.3 percent, ranking them 86th on the expanded Yahoo! Finance list of US industries. The application-software industry, by contrast, is pulling in profits of nearly 22 percent. Why aren’t MoveOn and the Democrats demanding a “public option” to compete with Microsoft and Adobe and drive down their “immoral” profits?

There are certainly industries doing worse than health insurance — airlines and newspapers, for example — but the notion that health insurers “make more money than any other business in America today” is preposterous. Advocates of a public option may find it tactically expedient to paint insurers as insatiable predators, swollen with ill-gotten profits. The reality is otherwise.

Still, the critics do have one thing right: More competition would bring down health-care premiums. But the way to increase competition is not by adding a government-run health plan to the 1,300 private firms already providing Americans with health insurance. After all, there’s no public option for auto insurance and life insurance, yet they’re sold in a highly competitive national market. There is no reason health insurance can’t be sold the same way.
Let’s be clear on this: the pro-Obama Care liberals, when they attack the insurance companies, are no different from the late and unlamented Senator Joe McCarthy in their willingness to demonize any group that stands in the way of their agenda.

And their tactic dates back to the demagogues of Ancient Greece, who would demonize the groups they wanted to oppress — typically the wealthy whose property they wanted to seize. They are, in other words, not merely misguided. They are sleazy.

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1 Comments:

Blogger Nick said...

Let's also be clear on one thing... the insurance companies are not (as of yet) objecting to the health care reform bills... they are pushing for them! Why? Because they see the government mandate on individuals as a form of rent seeking they can push on the population, forcing people to buy their product. They want reform, because it will increase the number of people (especially young healthy people) who will buy their product.

Insurance companies, as the bills get more refined, may end up changing their mind however once the numbers start really crunching, and they realize that many young people would rather pay the fine than the premium, especially if companies are required to accept pre-existing conditions.

1:07 PM  

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