Walmart Decides to Increase Their Pricing and Reduce Their Sales Force

Would Walmart actually thrive if they made their customers pay more and made it less convenient to do so?  Certainly not!  Walmart's success (as do most retailers and businesses) derives from keeping their customers happy.  Walmart does this by offering a wide variety of products at the lowest prices possible and making it easy for customers to buy them.  Their stock price rises and falls based on per customer loyalty and satisfaction which ultimately drive all other financial factors.  Walmart wouldn't survive if they made the radical changes suggested by this headline.

Health insurance companies are perhaps the only industry where consumer satisfaction is not the driving force for success.  Not surprising, the American Consumer Satisfaction Index published a study last year (ACSI Study 2015) showing that consumer satisfaction for health insurance companies is at a 10-year low.

It is no mystery why this is so.  Pretty much everyone is facing higher insurance costs next year with lower benefits.  Deductibles continue to rise, co-pay's increase (my ER copay went from $100 to $250), annual out of pocket maximums are getting higher...all the while, premiums just keep getting more expensive regardless of any rebates that ACA may offer.

Pay more...get less.  That's usually a formula for failure in the business world.  Not so with health insurance.  In fact that is pretty much their modus operandi.  This is why their CEO's are being rewarded with incredibly lucrative compensation packages and why insurer's profits continue to rise.

The main flaw in this equation is that we, as the insured, naively assume that our satisfaction is important to health insurance companies.  It is not.  CEO's are not striving to create happier consumers.  They are not beholden to the people paying the premiums.  Their main concern is to keep the shareholder's happy.   

And apparently, they are doing quite a good job at that.  Unfortunately, it's at our expense.

Don't Cry For Me Aetna (and UnitedCare and Anthem)!

(Update:  Aetna may have pulled out of these states because they didn't get Federal approval for their merger with Humana.  See Aetna's DOJ Letter)


Waaah!  Health insurers are crying.  They are losing money and can't carry on insuring all of the new ACA enrollees.  Aetna just announced that it was pulling out of 11 states where it offers ACA plans to individuals due to fabulous losses it incurred: $430million last year.  (CNN)  Other insurers have claimed similar or greater losses.  It kind of makes you feel sad for their financial burden. (Note: Aetna pulled out of California, my home state, after 2014 leaving me high and dry.)

I guess that's why Aetna's CEO saw a paltry pay raise of only $2.2m last year ($15.1m in 2014 to $17.3m in 2015 -  WJS).  UnitedHealth's CEO really suffered when he earned $66m in 2014, a belt-tightening increase of $42m from 2013 - FierceHealthCare).

It's true that a lot of insurers got slammed with a lot of new enrollees incurring more health services than expected.  Perhaps the most controversial part of the ACA was the mandate provision forcing people to buy health insurance.  The reasoning was simple.  How could insurers afford to get rid of all of those fancy restrictions on benefits (e.g., life time caps, pre-existing conditions, etc.) if they only had sick clients.  They needed healthy clients to pay premiums to make up the difference.  

As it turns out, many of the new ACA enrollees are not as healthy as anticipated.  They wound up (heaven forbid) actually using their health insurance policies for (wait for it)...health care. And now insurers want to stop offering individual policies because they claim that they are bleeding money.

A cursory examination of their woe-is-me claims shows that a loss in the individual health policy business is not actually making much of a dent in the overall profitability of major insurers:

• UnitedHealth's 2015 net profit: $5.8B (up from $5.62B)  
• Aetna's 2015 net profit:  $2.4B (up from $2B)
• Cigna's 2015 net profit: $2.09B (down from $2.1B 2014)
• Humana's 2015 net profit:  $2.4B (up from $2.2B)

(Note:  all figures taken from the company's own annual financial statements)

Remember, these figures have already accounted for the losses from ACA policies.  So not one of these companies showed a loss due to their ACA business.  They simply made less profit.  Aetna's profit actually increased despite their ACA losses.  

So if the individual policy business is tanking, then where is this profit coming from.  Turns out that most of these profits are coming from you, the taxpayer. Half, or even more, of these profits derive from Medicare, Medicaid and other government related policies. In other words, these companies are profiting from your tax dollars while making it harder for individuals to become insured by them under the ACA exchanges.

That's like paying the mechanic to fix your car and then someone else get's to drive it.  It's not right.

(Stay tuned...Are the insurers really spending more on patients?)