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Even Business Leaders Are Realizing Health Insurance Companies Serve No Purpose

Tuesday, September 19, 2017 By Wendell Potter, Truthout | Op-Ed
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(Image: Lauren Walker / Truthout)(Image: Lauren Walker / Truthout)

This piece is part of Fighting for Our Lives: The Movement for Medicare for All, a Truthout original series.

Polls show a growing number of Americans are warming up to the idea of single-payer health care. Whether that's a reaction to the repeal-and-replace bills proposed by congressional Republicans or to the failure of the Affordable Care Act to get us to universal coverage (or even reduce medical costs in a meaningful way) is largely irrelevant. What is relevant is that most of us have lost faith in private health insurers and want the government to do more in health care.

In fact, according to a June 2017 poll by the Pew Research Center, 60 percent of those surveyed said the federal government has the responsibility to provide coverage to all Americans.

Most of us have lost faith in private health insurers and want the government to do more in health care.

We've seen similar poll results in years past. As the former head of corporate communications for the global health insurance company Cigna, I saw surveys on a regular basis that consistently showed a sizable percentage of Americans held private health insurance companies in very low regard and would be happy not to have to deal with them. Those surveys also showed growing support for single-payer health care. In 2007, when I was still an industry executive, a proprietary poll conducted for the industry showed that only 19 percent of Americans viewed insurers favorably. That same poll showed that 77 percent believed Congress "should do something about the unreasonable cost of health insurance and other health care services." More people favored a Canadian-style health care system than any other potential solution.

What is different and significant this time, though, is that US business leaders are among those questioning our multi-payer system and embracing a system with just one payer, the government. That shift could prove to be the game changer that moves single-payer health care from what many pundits and politicians have considered a pipe dream to a very real possibility.

None other than Berkshire Hathaway chair and CEO Warren Buffett has joined the single-payer movement, as has Berkshire Hathaway's Republican vice chair, Charlie Munger. Buffett told PBS NewsHour in June that a single-payer system "probably is the best system" because it could do a better job of controlling ever-rising health care costs. A month earlier, he told Berkshire Hathaway shareholders that medical costs are "the tapeworm of American economic competitiveness."

In a Yahoo Finance interview, Munger cited the "massive amounts of excess cost" in the current US health care system -- which he described as a "Rube Goldberg system that arose by accident" -- as his reason for supporting single-payer health care.

Fighting for Our Lives: The Movement for Medicare for AllThe accounting and consulting firm PricewaterhouseCoopers (PwC) recently provided fresh evidence of the tapeworm in action. PwC's Health Research Institute, which annually projects the growth of medical costs in the employer insurance market for the coming year, predicts medical costs will grow 6.5 percent in 2018, more than the rate of growth in 2017 and far more than the expected increase in the Consumer Price Index. By way of comparison, the CPI increased 1.7 percent over the past 12 months.

"With medical cost trend hovering between 6 and 7 percent for several years, health spending continues to outpace the economy," PwC's researchers wrote.

They went on to note that although the rate of growth in medical costs showed a temporary decline in recent years as insurers and employers shifted more of the cost of care to individuals and families, "further cost shifting to consumers is getting more difficult. Even the 'new normal' is not sustainable."

As Buffett and Munger made their public declarations of support for a single-payer system, several like-minded business executives were forming a group called Business Leaders Transforming Healthcare, the ultimate goal of which is single-payer health care in the United States. Richard Master, CEO of MCS Industries, the country's largest manufacturer of wall and poster frames, founded the group after years of double-digit rate increases from his company's health insurer -- even after the ACA went into effect.

Master told me that the biggest driver of those rate hikes was prescription drug costs, which private insurers have had very little ability to bring under control. The cost of treating just two MCS employees diagnosed with Hepatitis C was more than $260,000 in 2014. The sharp and unanticipated spike in drug costs was the main reason Blue Cross hit MCS with a 14 percent premium increase in 2015. The premium rate hikes for 2016 and 2017 were also in the double digits.

Frustrated at the hit to his company's bottom line, Master started studying the health care systems of other developed countries and quickly learned that, as Commonwealth Fund researchers have been telling us for years, they all cover every citizen and also do a much better job of controlling health care costs. He has since become a vocal advocate of single-payer health care. In addition to launching Business Leaders Transforming Healthcare, he has produced two documentaries to draw attention to runaway health care costs, and drug costs in particular.

Many are concluding that insurers actually add costs to the system and make US businesses less competitive in an increasingly global marketplace.

Master and other US business executives have come to question the "value proposition" of private health insurers. In other words, they're asking what, if any, value do private insurers bring to the US health care system and economy. Many are concluding not only that insurers provide no essential value, but also that they actually add costs to the system and make US businesses less competitive in an increasingly global marketplace.

Even some of the big consulting and accounting firms that do business with insurers are speculating that they may soon be "disintermediated" in the same way that travel agents were. Consider this from a 2015 report by Ernst & Young (which now brands itself "EY"):

The core services [insurers] deliver -- underwriting risk and settling claims -- are becoming increasingly commoditized. In essence, payers are middlemen -- intermediaries between manufacturers, providers and patients. And, in industry after industry, disruptive innovation tends to do the same thing to intermediaries -- whether travel agents or music retailers. It disintermediates them. Private sector health insurers are particularly vulnerable to commoditization and disintermediation.

Some of the country's largest employers already have found ways to bypass insurers and are finding they're saving money while providing their workers with access to high quality care. Big enough to self-insure, companies ranging from Boeing to Walmart are increasingly working directly with health care providers in ways similar to the US Medicare program, which itself is a government-run, single-payer kind of system.

As Harvard Business Review reported in June 2017:

While Medicare has led the development of bundles in the U.S., large employers are now directly purchasing bundled care for their employees through selected providers. It is little surprise that direct employer-purchasing of bundled care is a burgeoning area of healthcare payment innovation. Purchasers of healthcare services encounter widely disparate charges across different healthcare delivery systems for equivalent surgical procedures, varying by up to 40%Boeing and General Electric have been among the leaders in adopting bundles, in part to address these disparities. Other companies including Lowe's, Walmart, McKesson and JetBlue Airways have recently partnered with the Pacific Business Group on Health (PBGH) and Health Design Plus (HDP) to launch the Employers Centers of Excellence Network (ECEN) which helps employers identify quality providers and negotiate bundled payments. PBGH is a non-profit, employer-led organization that represents public and employer healthcare purchasers, including numerous Fortune 100 companies. HDP is a third-party administrator with expertise in the development and management of travel surgery programs, providing strategic and operational management of this program.

Harvard Business Review noted that in just one area -- hip replacement surgery -- employees of Lowes saved about $3,300 in copayments and other fees compared to patients who got the same care under traditional insurance.

Boeing became one of the earliest direct purchasers of health care services when in 2014 it began contracting directly with hospital systems in the Seattle area for its many employees there. It has proven so successful that it has expanded its direct-contracting approach to other markets where it has large concentrations of employees, including St. Louis, Charleston, South Carolina and Southern California.

The point here is that very large employers have already concluded that they can get along just fine without private insurers. Small and mid-sized employers like MCS, however, don't have the large concentrations of workers for direct-contracting to work. And direct contracting clearly isn't an option for individuals and families who don't have access to an employer-sponsored plan.

Business executives at companies of all sizes are also coming around to understand another important truth about private health insurance companies in the United States: They actually strive to make health care cost more. As Brian Klepper, former CEO of National Business Coalition on Health, wrote in Employee Benefits News in July 2017:

The truth is that group health plans typically earn a percentage of total claims, and it is in their interests for health care to cost as much as possible.... Intentionally meek approaches to health care risk management result in excessive care and cost, in turn fueling higher expenditures, greater net revenues and elevated stock prices.

Klepper wrote that this way of doing business has been "spectacularly successful" for the health insurance industry. As he noted, between May 2009 and May 2017, the stock prices of the five largest investor-owned health insurers -- Aetna, Anthem, Cigna, Humana and United -- increased between 387 percent and 748 percent, much more than the Dow Jones average.

The CEOs of those companies have become spectacularly wealthy as shareholder value has skyrocketed. They undoubtedly have to be concerned to hear that a growing number of business leaders are saying it's time to give serious thought to single-payer health care in the United States. 

Not long before I left my job in the insurance industry in 2008, a coworker asked our CEO during a company leadership meeting what kept him up at night. He responded with a single word that most of us, I suspect, had to look up. That word was, you guessed it, "disintermediation."

He said he worried that someday a majority of Americans -- and more specifically, a majority of business leaders -- might begin to question the value proposition of insurance companies and reach the conclusion that they are little more than unnecessary middlemen. 

That "someday" may be close at hand.

Copyright, Truthout. May not be reprinted without permission.

Wendell Potter

Following a 20-year career as a corporate public relations executive, Wendell left his position as vice president of communications for Cigna, one of the nation's largest health insurers, to advocate for meaningful health care reform. In widely covered congressional hearings, Wendell disclosed how insurance companies, to boost profits, engage in practices that have forced millions of Americans into the ranks of the uninsured, and use deceptive PR tactics to undermine health care reform. Wendell is author of Deadly Spin and Nation on the Take. His newest project is Tarbell.org, which examines how money in politics impacts millions of Americans.

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Even Business Leaders Are Realizing Health Insurance Companies Serve No Purpose

Tuesday, September 19, 2017 By Wendell Potter, Truthout | Op-Ed
  • font size decrease font size decrease font size increase font size increase font size
  • Print

(Image: Lauren Walker / Truthout)(Image: Lauren Walker / Truthout)

This piece is part of Fighting for Our Lives: The Movement for Medicare for All, a Truthout original series.

Polls show a growing number of Americans are warming up to the idea of single-payer health care. Whether that's a reaction to the repeal-and-replace bills proposed by congressional Republicans or to the failure of the Affordable Care Act to get us to universal coverage (or even reduce medical costs in a meaningful way) is largely irrelevant. What is relevant is that most of us have lost faith in private health insurers and want the government to do more in health care.

In fact, according to a June 2017 poll by the Pew Research Center, 60 percent of those surveyed said the federal government has the responsibility to provide coverage to all Americans.

Most of us have lost faith in private health insurers and want the government to do more in health care.

We've seen similar poll results in years past. As the former head of corporate communications for the global health insurance company Cigna, I saw surveys on a regular basis that consistently showed a sizable percentage of Americans held private health insurance companies in very low regard and would be happy not to have to deal with them. Those surveys also showed growing support for single-payer health care. In 2007, when I was still an industry executive, a proprietary poll conducted for the industry showed that only 19 percent of Americans viewed insurers favorably. That same poll showed that 77 percent believed Congress "should do something about the unreasonable cost of health insurance and other health care services." More people favored a Canadian-style health care system than any other potential solution.

What is different and significant this time, though, is that US business leaders are among those questioning our multi-payer system and embracing a system with just one payer, the government. That shift could prove to be the game changer that moves single-payer health care from what many pundits and politicians have considered a pipe dream to a very real possibility.

None other than Berkshire Hathaway chair and CEO Warren Buffett has joined the single-payer movement, as has Berkshire Hathaway's Republican vice chair, Charlie Munger. Buffett told PBS NewsHour in June that a single-payer system "probably is the best system" because it could do a better job of controlling ever-rising health care costs. A month earlier, he told Berkshire Hathaway shareholders that medical costs are "the tapeworm of American economic competitiveness."

In a Yahoo Finance interview, Munger cited the "massive amounts of excess cost" in the current US health care system -- which he described as a "Rube Goldberg system that arose by accident" -- as his reason for supporting single-payer health care.

Fighting for Our Lives: The Movement for Medicare for AllThe accounting and consulting firm PricewaterhouseCoopers (PwC) recently provided fresh evidence of the tapeworm in action. PwC's Health Research Institute, which annually projects the growth of medical costs in the employer insurance market for the coming year, predicts medical costs will grow 6.5 percent in 2018, more than the rate of growth in 2017 and far more than the expected increase in the Consumer Price Index. By way of comparison, the CPI increased 1.7 percent over the past 12 months.

"With medical cost trend hovering between 6 and 7 percent for several years, health spending continues to outpace the economy," PwC's researchers wrote.

They went on to note that although the rate of growth in medical costs showed a temporary decline in recent years as insurers and employers shifted more of the cost of care to individuals and families, "further cost shifting to consumers is getting more difficult. Even the 'new normal' is not sustainable."

As Buffett and Munger made their public declarations of support for a single-payer system, several like-minded business executives were forming a group called Business Leaders Transforming Healthcare, the ultimate goal of which is single-payer health care in the United States. Richard Master, CEO of MCS Industries, the country's largest manufacturer of wall and poster frames, founded the group after years of double-digit rate increases from his company's health insurer -- even after the ACA went into effect.

Master told me that the biggest driver of those rate hikes was prescription drug costs, which private insurers have had very little ability to bring under control. The cost of treating just two MCS employees diagnosed with Hepatitis C was more than $260,000 in 2014. The sharp and unanticipated spike in drug costs was the main reason Blue Cross hit MCS with a 14 percent premium increase in 2015. The premium rate hikes for 2016 and 2017 were also in the double digits.

Frustrated at the hit to his company's bottom line, Master started studying the health care systems of other developed countries and quickly learned that, as Commonwealth Fund researchers have been telling us for years, they all cover every citizen and also do a much better job of controlling health care costs. He has since become a vocal advocate of single-payer health care. In addition to launching Business Leaders Transforming Healthcare, he has produced two documentaries to draw attention to runaway health care costs, and drug costs in particular.

Many are concluding that insurers actually add costs to the system and make US businesses less competitive in an increasingly global marketplace.

Master and other US business executives have come to question the "value proposition" of private health insurers. In other words, they're asking what, if any, value do private insurers bring to the US health care system and economy. Many are concluding not only that insurers provide no essential value, but also that they actually add costs to the system and make US businesses less competitive in an increasingly global marketplace.

Even some of the big consulting and accounting firms that do business with insurers are speculating that they may soon be "disintermediated" in the same way that travel agents were. Consider this from a 2015 report by Ernst & Young (which now brands itself "EY"):

The core services [insurers] deliver -- underwriting risk and settling claims -- are becoming increasingly commoditized. In essence, payers are middlemen -- intermediaries between manufacturers, providers and patients. And, in industry after industry, disruptive innovation tends to do the same thing to intermediaries -- whether travel agents or music retailers. It disintermediates them. Private sector health insurers are particularly vulnerable to commoditization and disintermediation.

Some of the country's largest employers already have found ways to bypass insurers and are finding they're saving money while providing their workers with access to high quality care. Big enough to self-insure, companies ranging from Boeing to Walmart are increasingly working directly with health care providers in ways similar to the US Medicare program, which itself is a government-run, single-payer kind of system.

As Harvard Business Review reported in June 2017:

While Medicare has led the development of bundles in the U.S., large employers are now directly purchasing bundled care for their employees through selected providers. It is little surprise that direct employer-purchasing of bundled care is a burgeoning area of healthcare payment innovation. Purchasers of healthcare services encounter widely disparate charges across different healthcare delivery systems for equivalent surgical procedures, varying by up to 40%Boeing and General Electric have been among the leaders in adopting bundles, in part to address these disparities. Other companies including Lowe's, Walmart, McKesson and JetBlue Airways have recently partnered with the Pacific Business Group on Health (PBGH) and Health Design Plus (HDP) to launch the Employers Centers of Excellence Network (ECEN) which helps employers identify quality providers and negotiate bundled payments. PBGH is a non-profit, employer-led organization that represents public and employer healthcare purchasers, including numerous Fortune 100 companies. HDP is a third-party administrator with expertise in the development and management of travel surgery programs, providing strategic and operational management of this program.

Harvard Business Review noted that in just one area -- hip replacement surgery -- employees of Lowes saved about $3,300 in copayments and other fees compared to patients who got the same care under traditional insurance.

Boeing became one of the earliest direct purchasers of health care services when in 2014 it began contracting directly with hospital systems in the Seattle area for its many employees there. It has proven so successful that it has expanded its direct-contracting approach to other markets where it has large concentrations of employees, including St. Louis, Charleston, South Carolina and Southern California.

The point here is that very large employers have already concluded that they can get along just fine without private insurers. Small and mid-sized employers like MCS, however, don't have the large concentrations of workers for direct-contracting to work. And direct contracting clearly isn't an option for individuals and families who don't have access to an employer-sponsored plan.

Business executives at companies of all sizes are also coming around to understand another important truth about private health insurance companies in the United States: They actually strive to make health care cost more. As Brian Klepper, former CEO of National Business Coalition on Health, wrote in Employee Benefits News in July 2017:

The truth is that group health plans typically earn a percentage of total claims, and it is in their interests for health care to cost as much as possible.... Intentionally meek approaches to health care risk management result in excessive care and cost, in turn fueling higher expenditures, greater net revenues and elevated stock prices.

Klepper wrote that this way of doing business has been "spectacularly successful" for the health insurance industry. As he noted, between May 2009 and May 2017, the stock prices of the five largest investor-owned health insurers -- Aetna, Anthem, Cigna, Humana and United -- increased between 387 percent and 748 percent, much more than the Dow Jones average.

The CEOs of those companies have become spectacularly wealthy as shareholder value has skyrocketed. They undoubtedly have to be concerned to hear that a growing number of business leaders are saying it's time to give serious thought to single-payer health care in the United States. 

Not long before I left my job in the insurance industry in 2008, a coworker asked our CEO during a company leadership meeting what kept him up at night. He responded with a single word that most of us, I suspect, had to look up. That word was, you guessed it, "disintermediation."

He said he worried that someday a majority of Americans -- and more specifically, a majority of business leaders -- might begin to question the value proposition of insurance companies and reach the conclusion that they are little more than unnecessary middlemen. 

That "someday" may be close at hand.

Copyright, Truthout. May not be reprinted without permission.

Wendell Potter

Following a 20-year career as a corporate public relations executive, Wendell left his position as vice president of communications for Cigna, one of the nation's largest health insurers, to advocate for meaningful health care reform. In widely covered congressional hearings, Wendell disclosed how insurance companies, to boost profits, engage in practices that have forced millions of Americans into the ranks of the uninsured, and use deceptive PR tactics to undermine health care reform. Wendell is author of Deadly Spin and Nation on the Take. His newest project is Tarbell.org, which examines how money in politics impacts millions of Americans.