It is getting pretty difficult to find something nice to say about the nation’s two largest health plans. Wellpoint’s Blue Cross of California unit, already fined by the fairly tame CA Dept. of Managed Healthcare, is now being sued by California hospitals for what appears to be a general systematic cancellation of high-cost member policies. It’s worth noting that they don’t seem to be investigating the applications of those members who didn’t make any claims. Lisa Girion, on her way to health care journalistic stardom at the LA Times has more:
A class-action lawsuit filed Friday on behalf of all California hospitals accused Blue Cross of California of routinely violating state law by refusing to pay hundreds of hospitals statewide for patient care it authorized.The suit is the latest salvo in a growing controversy over actions by Blue Cross to cancel the individual health insurance of sick policyholders, sometimes saddling canceled patients with huge medical bills. Although Blue Cross contends that the cancellations are justified partly to crack down on fraud, consumer advocates and policyholders say some revocations are carried out simply as a way for Blue Cross to avoid paying expensive claims.
Larry Glasscock, the CEO of Anthem, (now Wellpoint) has been pretty quiet in the press, but Wellpoint’s pre-merger figurehead Len Schaeffer has historically not been–and it’s his side of the company that evidently was causing all the trouble. In fact as I’ve pointed out here before, although Schaeffer accurately understands what the problems in health care are (practice variation and a lack of IT use) the solutions he used over the years don’t solve those problems, but instead relied on better risk selection and more aggressive pricing to make Wellpoint very profitable. What exactly was his "value-add" to society for all that money he "earned".
But of course in the lexicon of earners he’s a chump compared to Bill McGuire at UnitedHealth Group. It does appear though that McGuire may be fired by Monday as an external investigation suggests that the stock options he received were all illegally backdated. Whether or not it was illegal, his actions suggest staggering greed. He already had wealth beyond anyone’s imagination. What exactly was the point in cooking the books and effectively stealing from shareholders to add more?
I guess with the amount of sycophants he surrounded himself with, like these ones quote in the WSJ he really felt he was worth every penny of the $1.6 billion, or whatever:
"We’re so lucky to have Bill," Ms. Mundinger, a longtime
compensation-committee member, told the Journal earlier this year. Of his rising
pay, she said: "He needs to be compensated appropriately so that his business
model has believability in the market."
It wouldn’t be quite so bad if the bulk of these profits and vast riches were made back in the 1990s. At least then health plans were acting as what Uwe Reinhardt used to call "bounty hunters" and saw their mission as removing the excess earnings of hospitals and specialists, even if they were redirecting some of them to their executives. But at least Malik Hassan (Healthnet) and Len Abramson (US Healthcare) were clearly going after the providers and were delivering lower rates of premium growth (and in some years negative growth) to their customers, the big employers.
But in the past six to seven years, that has all changed. The health insurers have completely given up trying to figure out how to lower costs, and have just stuck big increases onto their customers. What’s worse is that as overall premiums and costs have gone up, the share that the insurers have kept has increased! Thus, they are screwing their customers, and at the same time keeping a bigger share of larger revenues–which has resulted in those huge profits and stock option gains.
And even worse, they’ve all got heavily into the business of destroying what was left of the risk pool by providing high-deductible highly underwritten plans such as Tonik (Wellpoint), or even worse buying scumbag quasi-fraudulent plans such as Rooney’s Golden Rule (United).
I know that the employers and taxpayers are dumb, but that doesn’t mean it’s been a good thing for McGuire, Schaeffer et al to take advantage of them.
There are obviously talented and good people working in many parts of health plans, as I’ve documented elsewhere. Several major innovations have come from within them, particularly in population and disease management. But recently the people in the executive suites have shamed their organizations and harmed not only their industry, but the health care system and society as a whole.
And, eventually, that will mean that when time comes to make an argument in favor of why we should have a private sector health care insurance industry, the rational moderate voices in support of some role for health insurance intermediaries–of whom barely count myself as one– will be that much weaker.
UPDATE: McGuire is indeed gone. What happens to his $1.6bn of in the money vested options is less clear. Wall Street doesn’t seem to care–the stock is flat today.