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.

Eric Novack has something to say about HDHP/HSAs, even more to say about who’s getting rich as a result, and little to mention about self-selection. But then I’m just a cynic.

>A simply fascinating report has come from Aetna recently. This from the company that has been about the worst in the Phoenix area for reimbursing physicians at well-below Medicare rates for services. Let me just copy some of the main findings (highlights mine).

Full replacement plans see the most significant savings from Aetna HealthFund. Health Reimbursement Arrangement (HRA) plans effective in January of 2003 experienced an average medical cost trend of 1 percent over three years, meaning that medical costs for these plans increased only 3 percent between 2002 and 2005.Employers who offered Aetna HealthFund as an option are seeing savings across all products offered. Those who offered an HRA option plan effective in January of 2003 experienced an average medical cost trend of 6.7 percent over a three-year period. Both Aetna HealthFund HRA and Health Savings Account (HSA) members with chronic conditions maintained or improved the level of care they received prior to joining the plan, including a 6 percent higher usage of inhaled steroids among asthmatics when compared to a similar population. Preventive care was also maintained or improved. For example, first-year HSA members received cervical cancer screenings at a 13.8 percent higher rate than PPO members. Generic drug utilization for HRA members was 4.5 percent higher than PPO members.

The essence is this: companies that only offered HSA/HRA saw health cost increases averaging only 1% per year over 3 years. Those that had an HSA as an option saw increases averaging only 2.3% per year over 3 years. All this while utilization of preventative services appears to have stayed the same or gone up. Now this is only a snapshot of proprietary data. But maintaining below inflation rates of health spending increases for more than one year deserves the attention of everyone genuinely interested in keeping the healthcare from going over the cliff (or further down the hillside, depending upon where you believe we are).

The really big question is this: Are the cost savings to Aetna being passed on to the consumer? In other words, are premiums getting that much more affordable compared to standard PPO, HMO plans? I do not know for sure, but I am suspicious that these savings are translating into much higher profits, at least for now—meaning that costs to the public are continuing to go up unabated. I shall try to contact Aetna and get the answer and update you.But for the anti-HSA crowd… this certainly does not help the arguments that are so vehemently against HDHP/CDHP.

UPDATE: A shot across the bow for the Medicare-for-all crowd.
From the story:

Medicaid officials comb applications to find Medicare recipients who work in such jobs, focusing on large employers most likely to offer health insurance. If the employee premiums are less than Medicaid’s costs for the same family, the state contacts the family and offers to reimburse their portion of the premiums.
Under the program, Medicaid pays only the employee portion of the premium, not the employer’s. Typically, employees pay about a quarter of the total insurance premium, with the employer paying the rest, according to the Kaiser survey.
Washington spends an average of $173 a month per person on Medicaid. But it pays only about $76 a month in premiums to put a person on an employer’s plan, plus another $16 a month for any services not covered by some employer’s plans, such as vision and dental.

It is still very flawed, since it relies on the employer tax exclusion for health benefits—but it is saving the state (and really, you, the taxpayer, money).
But, where is the Dad in the story… or is that not politically correct?