On August 17, Chairman of the House Energy and Commerce Committee, Henry Waxman (D-CA), and Chairman of the Subcommittee on Oversight and Investigations, Bart Stupak (D-MI), issued letters to 52 health insurance companies seeking detailed information about the insurer’s executive compensation, corporate events, profits from various lines of business and other business practices. Responses to these requests are due September 4, and September 14, 2009. Even though health insurers which received these letters are not legally obligated to comply, the House Energy and Commerce Committee could subsequently vote to subpoena such information.
The letters do not reference any particular health reform initiatives or positions. However, the health insurance industry has been a vocal opponent of a government-run public option, a position spearheaded by the industry trade association, America’s Health Insurance Plans (AHIP). On the other hand, when promoting or defending the Administration’s health reform initiatives, including the public option, spokespersons are sometimes disparaging of insurer profits. For instance, in his weekly address on August 15, President Obama’s express focus was that health reform would put patients’ interests ahead of insurer profits. Several weeks ago, House
Speaker Nancy Pelosi (D-CA) went as far as accusing health insurance companies of making “immoral profits.” Compared to other industries, health insurance is a relatively low margin business. According to a Kaiser Health News alert published on July 24, 2009, Fortune magazine reported that profit margins for insurers averaged 7.1 percent in 2005; 5.8 percent in 2006; and 6.2 percent in 2007. In 2008, profits fell to an average of 2.2 percent. In an earlier Kaiser Health News alert published on June 22, 2009, the author noted that, of the $2.5 trillion spent on health care this year, the elimination of health insurers’ profits and executive compensation would lower health care spending by just 0.5 percent. The June 22 Kaiser Health News alert identified rising prices and increased utilization of medical services as the major cause of health care’s escalating costs.
It is difficult to know whether legitimate Congressional concerns about executive compensation and business practices in the health insurance industry have caused the ratcheting up of the rhetoric about health insurer profits or whether the rhetoric has fueled the House’s interest in the business practices of health insurers.