Insurance industry supports government-subsidized healthcare when they profit from it

Aetna has made billions from Medicaid expansion, says government business is driving its growth

The associations representing America’s doctors, nurses and hospitals have all issued strong condemnations of the American Health Care Act, saying that the bill as written would take coverage away or make it prohibitively expensive for millions of Americans. Suspiciously silent on the matter, however, was the pharmaceutical industry’s trade group.

Pharmaceutical Research and Manufacturers of America, PhRMA for short, has regularly sent lobbyists to Capitol Hill this year discuss the American Health Care Act specifically, lobbying records show, but they did not release a statement about the bill after it passed in the House and have not returned an email from ConsumerAffairs asking for their opinion on it.

Perhaps they thought it would be better to keep a low profile in the wake of generous tax breaks that the Republican legislation promises drug companies, as well as device-makers and health insurance companies. 

Under previous legislation, Obama’s Affordable Care Act, the federal government imposed a new tax on drug companies in exchange for giving them business through government health programs like Medicare and Medicaid. The American Health Care Act as written would repeal those taxes, a move that the Joint Committee on Taxation has said would reward the industry with a $25 billion tax break at the expense of taxpayers. The American Health Care Act would also repeal an excise tax imposed on medical device companies by the previous administration, a tax break worth another $20 billion to the industry. 

Health insurance companies also big winners

Also poised to benefit from tax breaks in the American Health Care Act are the executives of health insurance companies. In 2013, an amendment to the Affordable Care Act mandated a tax on the salaries of health insurance executives who made upwards of $500,000. (Otherwise, employee salaries can generally be written off as a business expense). The American Health Care Act would repeal that tax, giving a $400 million break to health insurance behemoths like Aetna, whose chief executive Mark Bertolini made $41 million in total compensation last year. 

It’s not just tax breaks that would help health insurers. An amendment that Representative Tom MacArthur added to the American Health Care Act would allow insurance companies to raise premiums for customers, based on their “health status.”

The bill’s proponents claim this amendment would have limited impact, because it would only apply to people who live in states that seek “waivers” to allow the policy. Additionally, only people who had a lapse in coverage that lasted longer than 63 days and who are purchasing insurance through the public exchange would be affected. Some lawmakers as a result claim the MacArthur Amendment actually helps people with existing health problems. “MacArthur Amendment strengthens AHCA, protects people with pre-existing conditions,” Representative Paul Ryan tweeted last week.

But America’s doctors say that’s not the case. The existing ban on using health status to determine a customer’s health insurance rates “protects individuals from being discriminated against by virtue of their medical conditions,” the American Medical Association recently wrote to Congress. “We are particularly concerned about allowing states to waive this requirement because it will likely lead to patients losing their coverage."

The health insurance industry also claims that they are concerned about protecting people with pre-existing conditions. But unlike the doctors, the health insurer lobbying association has refused to give an opinion on how Congress’ specific policy proposals, like the MacArthur Amendment, would actual affect people with pre-existing conditions.

America’s Health Insurance Plans “has not taken positions supporting or opposing the AHCA or any of the amendments,” an association spokeswoman writes to ConsumerAffairs via email.

In testimony before Congress, the chief executive of America's Health Insurance Plans only offered vague support for the idea of insuring those with existing conditions, and she added a caveat. “No individual should be denied or priced out of coverage because of their health status. However, with this as a principle, modifications to existing insurance reforms are needed,” executive Marilyn Tavenner said. “ order to ensure these reforms work effectively, they would need to be coupled with strong incentives for individuals to maintain continuous coverage. “

Keeping that “continuous coverage” may not be as easy as it sounds. "That's not a good protection. If you lose your job, if you have some other adverse life circumstance, if you were covered through your spouse and get divorced” -- any of those events could cause a “lapse” in continuous coverage longer than 63 days, notes Dr. Adam Gaffney, a pulmonologist and lecturer at Harvard Medical School. 

Gaffney guesses that health insurance companies probably support the MacArthur Amendment that doctors dread so much. "My sense is that it is certainly beneficial for them to be able to charge people higher premiums or be able to cover less healthcare,” he tells ConsumerAffairs. 

Health insurers say they are worried about Medicaid

Health insurers have, however, expressed surprising concern for one group of America’s more vulnerable patients: those who depend on Medicaid, or the program that subsidizes healthcare for low-income Americans. “The American Health Care Act needs important improvements to better protect low- and moderate-income families who rely on Medicaid or buy their own coverage,”  Tavenner, of America’s Health Insurance Plans, added in a public statement after the healthcare bill passed the House. 

And in an even bigger surprise, the chief executive of one health insurance company in particular has expressed willingness to discuss a single-payer policy, according to one news report. The site VOX reported on Friday that “a top insurance executive signals openness to government-financed health care.” They based their report on a leaked recording of Aetna CEO Mark Bertolini, who reportedly told an employee: “Single-payer, I think we should have that debate as a nation.”

Usually, the general idea of government-subsidized healthcare seems to make the health insurance industry uncomfortable. In 2009, America's Health Insurance Plans took a strong position against the public option -- a system in which the federal government would introduce its own, publicly-financed health insurance plan, giving the public an option that would compete against private health insurance plans.

Though consumers may have benefited from the competition, the health insurance industry wasn’t having it.  “A new government-run plan would underpay doctors and hospitals rather than driving real reforms that bring down costs and improve quality,” the industry group charged at the time. 

And last September, when Senate Democrats floated the idea of a public option yet again, the AHIP again came out swinging. “We need proven solutions that will make healthcare more affordable for everyone. A public option is not one of those solutions,” AHIP insisted. (Senate bill sponsor Senator Jeff Merkley countered at the time: “The fact that insurance companies are already rallying to kill this idea shows all the more the importance of a public option in holding insurance companies accountable and providing much-needed competition in the marketplace.”)

Medicaid expansion is good for business

It doesn’t take any real digging to see that health insurance companies support government-run healthcare when they are the beneficiaries of government money.

In that recording of Aetna CEO Mark Bertolini that was leaked to VOX, Bertolini reportedly goes on to say: “We can be there in a public-private partnership to do the work we do today with Medicare, and with Medicaid at every state level.” In other words, Aetna already profits from Medicaid and Medicare contracts and would be interested in debating the idea of single-payer, if the government contracted Aetna's services to actually run that program as well.

Bertolini’s support for something like single-payer made news the same day that Aetna celebrated the billions it had made from Medicaid contracts. In a quarterly report, Aetna told investors Friday that it earned $8.4 billion in revenue from Medicaid in 2016, an increase of $4 billion from 2013. “New contract wins and expansion of existing relationships drive growth,” the company explained in a PowerPoint presentation, on a slide that boasts about a “Track Record of Significant Medicaid Growth.” 

At the same time that Aetna has celebrated its earnings under Medicaid contracts, in no doubt thanks to Medicaid expansions under the Affordable Care Act, the company has also blamed the Affordable Care Act for steep losses. Aetna has already pulled out of the individual insurance market in most states and on Wednesday announced that it would leave Delaware and Nebraska, the only two states where Aetna remains in the exchange.

The company said that the public exchange caused them “around $225 million in losses" this year, yet Aetna’s presentation for investors published last week tells a much better story. The company reported $18 billion in profits last year, a steady increase from $17 billion in 2014. Aetna also boasts about growing revenue and significant shareholder return. 

In remarks to investors earlier this month, Bertolini pointed to government programs as the most significant source of business growth. "Let me begin with our Government business, which continues to be the predominant driver of our growth story," Bertolini said. He discusses how Medicare Advantage and Medicaid contracts both helped the company. 

He goes on to say that "Aetna is well positioned to take advantage of the strong growth dynamics in Medicaid, as states continue to look to the private sector to manage the health of their Medicaid beneficiaries. Aetna’s strong positioning and the demographics supporting Government revenue growth make it one of the most compelling opportunities for the foreseeable future."

Aetna's spokesman frames the company's "losses" this way: "Our approximate individual Commercial product losses (pre-tax) were $100 million in 2014, $130 million in 2015, and $450 million in 2016, with projected losses of more than $200 million in 2017...As I’m sure you’re aware, Medicaid does not fall into that product category," Aetna spokesman TJ Crawford writes to ConsumerAffairs. 

Single-payer vs. public option vs. holistic medicine

Under the Affordable Care Act’s Medicaid expansion, millions more Americans became eligible to enroll in the program. Because the feds contract Medicaid services out to private insurance companies, the insurance industry as a whole earned an estimated $900 billion in federal dollars from the new customers. “Expanding Medicaid creates a significant business opportunity for insurers operating Medicaid managed care plans,” writes the Center on Budget Policy and Priorities, a nonpartisan think tank.

Even UnitedHealth Group, another insurer that left the Obamacare exchange after claiming it suffered losses, in 2013 told investors that they expected strong growth “as Medicaid programs grow through the ACA expansions.” 

"I think the insurance industry would like to see the subsidization of Medicaid to be as high a possible because they want that to go in their pockets,” adds Gaffney, the physician and Harvard lecturer. In his spare time, Gaffney writes about health policy and volunteers for Physicians for a National Health Program, a collective that advocates for bringing a single-payer or Medicare-for-all variety of health insurance reform to the United States. 

Gaffney and his peers represent a minority in the healthcare world. Even the American Medical Association, for all of its critiques of the health insurance industry and Republican healthcare proposals, has stopped short of embracing single-payer reforms or even a public option. Back in 2009, when the public option idea was still a  possibility, the American Medical Association jumped in the debate to say it would fight it. Healthcare should be "provided through private markets, as they are currently,” said the AMA, which represents 250,000 of the nation’s doctors. Echoing sentiments made by private insurers, the doctors’ group wrote to Congress that giving the people a choice to join a public plan would actually “restrict patient choice by driving out private insurers.”

Meanwhile, Aetna’s own recent presentation to investors indicates that Aetna would like to “expand” the general definition of health, to include factors that are not actually healthcare. Aetna tells investors in a PowerPoint slide that they want “healthcare" to account for only 10 percent of health's definition.  Aetna’s slide says that genetics, individual behavior, and social and environmental factors -- all things that a health insurer like Aetna is not in the business of covering -- should account for the remaining 90 percent of health’s meaning. The company frames it this way; “Aetna is taking a more holistic view of health.” 

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