Some questions for AHIP: The insurers are victims of the economy?

Below is my letter to AHIP seeking clarity of their Factors Fueling Rising Health Care Costs 2008 report by Price Waterhouse Coopers:

The report claims to be indicating where the source of the 6.1% rise in premiums comes from and then states that $.13 of every premium dollar goes to insurer profits, consumer services, government payments. Is that $.13 the amount of increase in these expenses of the overall 6.1% increase or is it the number of every premium dollar that goes to insurer profits, salaries, etc.? Where is the amount of money that insurers spend on their own operational costs, including salaries and defense of lawsuits by government entities come into play? Is this part of the 13% and if so, what part?

As far as apparent, for every dollar paid, consumers can hope to obtain $.87 worth of coverage and according to your own report, the biggest contributor to the rise in premiums after inflation was the price for health care services (30%)...is there a reason that your contract negotiators who provide this "service" for consumers at consumer expense aren't doing a better job of negotiating? It seems obvious that while you take consumer dollars to pay for these negotiators and then you again take consumer dollars through premium increases to pay for these doctors, that consumers are double paying for overchargining providers whom your contractors are having little success with "negotiating", perhaps you can further reduce administrative costs by examining the work performance of these employees.

Consumers also pay for the 18% of "wasteful spending" that is attributed to defensive medicine. If insurers can identify wasteful spending, and providers engage in defensive spending to cover themselves and control their own insurance costs for malpractice and reap a benefit from such spending, why is the solution for consumers to forfeit their right to recover for medical malpractice? Instead of arguing that providers should not be liable for their mistakes (liability controls), perhaps providers should be penalized by higher rates by insurance companies for their defensive medical practices in their malpractice rates or perhaps consumers should be rewarded for opting out of defensive medicine. As it stands now, if a consumer wants to pass on a specific test it is considered against doctors orders and consumers are warned that their insurer may not honor their claim.

Perhaps the insurance industry can address why they only look to the consumer to cover them via paying for defensive medicine, bearing the risk of opting out of defensive medicine, and forfeiting the right to recover against incompetent physicians. If you can identify percentages of the cost of defensive medicine, it seems that insurance companies should be recovering these amounts from providers, NOT consumers. Clawbacks of such cost coverage from providers would save consumers these costs.

One of your recommendations is the increased use of technology to "support improved quality management and streamline administrative processes", the consumer should bear the responsibility for reporting. Right now there is a huge loophole for people using health savings accounts in that there is NO insurer oversight or verification that those dollars are spent to pay for actual medical services. Insurers threaten that they will have to raise premiums to cover administrative costs if such oversight is required and prefer to leave it to the IRS. If insurance companies still have to pay something after those health savings account dollars are spent, why would they ignore how those dollars are being spent which will obviously lead to an increase in premium cost for these second-choice health plans especially since the report's self-congratulatory tone seems to indicate that insurers are doing a bang up job at administration and therefore such costs would be minimal?

Finally, it seems beyond a little bit self-serving that your recommendations do not address waste, fraud and bad investments within insurance companies nor do you address ANYTHING that insurance companies can do better except further limit coverage by dictating coverage for treatment options. While ERISA still largely protects insurers in their increased medical decision making role, what are the anticipated costs of liability for individuals who will sue insurers whose decisions cost them their lives and health? ERISA won't protect insurers from individual private insurance plans purchased by consumers on their own, is this part of what AHIP hopes to achieve by promoting limited liability for physicians?

It's an interesting report but goes too far in presenting insurance companies as "victims" of high prices, inflation and those peskyinsureds who are getting old, getting sick and actually expecting their policies to provide them with some coverage...we're already getting less than a dollar worth or service for a dollar worth of payment.

Thanks for your attention...