Health insurers' profits soar
The largest firms' 2009 net income rose 56 pct., a report said. Insurers called the study skewed.
WASHINGTON - As the nation struggled last year with rising health-care costs and a recession, the five largest health insurance companies posted combined profits of $12.2 billion - up 56 percent over 2008, according to a new report by liberal health-care activists.
The report, based on the companies' 2009 financial filings with the Securities and Exchange Commission, said insurers WellPoint Inc., UnitedHealth Group, Cigna Corp., Aetna, and Humana Inc. racked up the profits even though they covered 2.7 million fewer subscribers than they did the year before.
The report, released Thursday, also said three of the five insurers cut the proportion of premiums they spent on their customers' medical care, committing relatively more to salaries, administrative expenses, and profits.
Prepared by Heath Care for America Now, a coalition of liberal advocacy groups and labor unions, the report was aimed at bolstering the drive by Democrats to complete work on a health-care overhaul, which insurers have vigorously opposed.
Industry representatives criticized the report's approach, pointing out that 2008 was a bad year financially across many industries, skewing the 2009 comparison.
"It is disingenuous to look at the profits at one company today compared to where it was in the depth of a recession," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's lobbying arm.
The 2009 profits, nonetheless, are intensifying pressure on an industry already under attack for raising premiums and denying coverage to millions of Americans.
In California, Anthem Blue Cross, a subsidiary of WellPoint, is facing growing scrutiny over its decision to raise premiums this year for individual health insurance policies by as much as 39 percent for some consumers.
WellPoint this week defended the rate increase in a letter to Health and Human Services Secretary Kathleen Sebelius, saying the rising rates reflected soaring medical costs and would average closer to 20 percent for most customers.
WellPoint also said Anthem's business serving individual policyholders in California lost money in 2009, as the weak economy prompted many customers to switch to lower-cost options. The company did not say how much Anthem lost.
WellPoint, of Indianapolis, as a whole posted a profit of $4.75 billion in 2009, thanks in part to the sale of its NextRx pharmacy benefit management business, which accounted for roughly half the company's profit.
That put WellPoint's profit margin at 7.3 percent, the highest of the five big insurers.
Margins at the four others ranged from 3.4 percent for Humana, of Louisville, Ky., to 7.1 percent for Philadelphia's Cigna.
Other sectors of the health-care industry, including pharmaceutical companies and device-makers, typically are more profitable.
But the health-insurance industry's improving financial fortune is drawing more criticism because all but one of the five companies - Aetna - achieved the better results while losing customers.
WellPoint, for instance, shed nearly 1.4 million customers, a 3.9 percent drop over 2008. Cigna lost 5.5 percent of its customers, or 639,000 people.
The shrinking customer base reflects increasing unemployment and the growing number of companies that are dropping coverage.