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The Blame Game

1:10 PM, Feb 24, 2010 • By JEFFREY H. ANDERSON
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The Blame Game

At tomorrow's "health summit," we'll hear a lot of talk from President Obama and congressional Democrats about unscrupulous and under-regulated insurers who pad their obscene profits by raising prices at their whim at the expense of helpless Americans from coast to coast.  If only the federal government were as fiscally constrained as insurers.  As I detail in a longer post over at NRO, of all the grossly false claims that underlie ObamaCare, this one might well take the cake.

Here's the real story:  According to the most recent Fortune 500 rankings, health insurers' profits are just 2.2 percent of revenues.  Medical facilities have higher profits (2.4 percent).  Profits from medical products and equipment (16.3 percent) and from pharmaceuticals (19.3 percent) are seven-to-eight times as high.  The combined annual profits of health insurers who cracked the Fortune 1000 list are less than $9 billion, or less than one half of one percent of the $2.5 trillion that America spends each year on health care.  So President Obama could eliminate insurers' profits altogether (a possible goal), and more than 99.5 percent of our health costs would remain.

Anthem of California, the target de jour of Democratic rhetoric, recently posted less net income per enrollee than its two largest non-profit competitors, as it noted in a letter to Health and Human Services Secretary Kathleen Sebelius.  California's Department of Insurance didn't object to Anthem's recently announced rate-increases (which an independent actuarial firm judged to be necessary to avoid losses, rather than to pad profits), which were propelled by rising drug and hospital costs -- and by the economy.  The president gladly blames the economy for his having ushered in by far the most jaw-dropping deficits in our nation's entire history, but he doesn't like to admit that this same economy causes per-person insurance costs to rise, as some healthier enrollees decide to roll the dice and temporarily drop their policies to pay other bills, leaving less healthy people (on average) in the insurance pool.

Anthem's well-publicized rate-increases would only apply to about 10 percent of the market -- the market for individually purchased insurance.  That's the portion of the market where, in relation to current law, premiums would drop under the $61 billion House GOP health bill (by 5 to 8 percent, according to the Congressional Budget Office) or the $180 billion small bill but would rise by $2,100 for the average family under the $2.5 trillion proposed Democratic health care overhaul.

Nobody is in love with insurance companies, and most of us have our own personal stories to tell.  But when you hear the Democrats rail against insurers' profits and argue on behalf of more federal regulation, more federal bureaucracy, and more federal spending, it would be good to keep these facts in mind.

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