In 2014, health insurers expect to rake in $50 billion more than usual, growing to $230 billion a year more by 2012, as a result of over 30 million Americans buying government mandated health coverage under Obamacare – a goodly chunk of those additional premium incomes being federally subsidized.
This is like a wet dream to underwiters. Young, fit folk who won’t make many claims or none at all will be helping support losses from older, frailer insureds – and can’t even default on their premiums when their pocket is tight. That’s a recipe for definite and sutainable underwriting profit – and subsequently huge investment profit from the return on those premiums while they’re invested in all kinds of other stuff pending any claims payouts. Investment profit is where insurance companies usually make the bulk of their bottom line.
So, says ABC, health insurers are worried that Republicans can’t agree on exactly how to repeal Obamacare – all at once, keep some bits, which bits? – nevermind agree on exactly what can replace it. The Romney campaign’s lack of specifics in particular, on this as on so many other issues, has left insurance bigwigs asking the Romney campaign “where are we going to make even bigger profits, that we should back you and repeal?”
Robert Laszewski, an industry consultant and blogger, says the tension is becoming unbearable.
“I spend a lot of time in executive offices and board rooms, and they are good Republicans who would like to see Romney win,” said Laszewski. “But they are scared to death about what he’s going to do.”
The industry has three items in particular it wants stripped out: cuts to Medicare Advantage private insurance plans; a requirement that insurers spend 80 percent of premiums on medical care or rebate the difference to their customers; and new taxes on insurance companies. But CEOs don’t share the visceral objection that many Republicans have to a bigger government role in health care.
Industry executives “are Republicans in the sense that they’re worried about the bottom line and they want to retain private sector involvement,” said Hoagland, the former Cigna vice president. “But some of their bottom line is now driven by Medicare and Medicaid. So it’s not like they’re red or blue. It’s more like purple.”
In my humble opinion, the real biggie there is the 80% requirement – cutting that would create a federally-subsidized, no holds barred, cash cow that can be milked ad infinitum for investment profits to keep shareholders smiling as well as for executive compensations, golden parachutes and bonuses on a scale usually reserved for the stratospheric level of Wall Street financiers and oil bosses. Still, all around the show, the health insurance industry wants to have its Obamacare cake and eat it too.