Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Fighting the Health Care Blues

On a cold and rainy December 2, while the Senate in Washington was slogging along debating health reform, a remnant troupe of public-option supporting Organizing for America stalwarts stood outside the corporate headquarters of WellPoint, Inc. in the center of downtown Indianapolis. Minutes before their demonstration started, three single payer activists slipped in and out of the WellPoint office dropping off a shareholder resolution for next May’s annual meeting.

WellPoint, also known as Anthem or Blue Cross, is the perverted spawn of what was once a charitable venture known as Blue Cross/Blue Shield of Indiana. From the 40s up into the 90s Blue Cross of Indiana was like all the other Blues around the country, non-profit with a charitable mission. Its board of directors included physicians, hospital administrators, labor and community leaders, and it existed to serve the needs of patients. But the healthcare market had become increasingly cutthroat, and in the aftermath of the Clinton Health Plan’s crash and burn, there was a huge consolidation in the industry. Doctors went from solo or small group practices into larger and larger groups. Hospitals that had been independent since their founding merged and national chains of for-profit hospitals grew powerful and predatory.

The most significant consolidation of all happened in the insurance industry, yet it is the least understood and appreciated. Health insurance was once predominately state or regional non-profit Blue Cross plans or other regional non-profits, and a few national for-profits. Now there are nine major national health insurers dominating the country. They are for-profit, beholden not to their customers but to their shareholders. Like most consolidated industries, they don’t compete head to head in most markets, but rather divide up the markets and crush smaller local competitors. Did I mention that the insurance industry is exempt from federal anti-trust laws? The American Medical Association’s 2007 report “Competition in health insurance: A comprehensive study of U.S. markets,” found that in the majority of areas studied, a single health insurer dominated the market. So much for competition.

The field these behemoths compete on is in Washington, DC. They can buy and sell Senators and dominate regulatory agencies. More on that later after we come back to the story in Indiana.

In the early 90s the Hoosier Blue Cross leadership decided that the future looked bleak for non-profit health insurance. They began a series of maneuvers to radically restructure the company. They took off the gloves. Goodbye to a charitable mission. Goodbye to being tax-exempt. Hello Wall Street.

Blue Cross became Anthem turning a non-profit into a mutual company. This set the stage for demutualization and a public stock offering (IPO). In 2001 Anthem announced its intention to convert from a mutual insurance company to a stock corporation and filed its demutualization proposal with the Indiana Department of Insurance. By this time Anthem had already completed a frenzy of mergers and acquisitions of Blues in Colorado, Connecticut, Kentucky, Maine, New Hampshire, Nevada, and Ohio. None of policyholders in those states had any say in this matter. Just days after the Indiana Department of Insurance commissioner approved Anthem’s demutualization proposal, Anthem announced that its IPO had yielded $1.7 billion.

Now came the mother of all mergers. Blue Cross of California had been following a similar path beginning with their demutualization in 1993 and subsequent acquisition of Blues in Missouri, Georgia, Virginia, and Wisconsin, as well as acquiring the health divisions of Massachusetts Mutual, and John Hancock, among others. They changed the corporate name to WellPoint. In 2004 Anthem and WellPoint merged, becoming the largest health insurer in the US with 34 million lives covered.

The $20.8 billion merger created a cornucopia of compensation for executives of both parent companies. Not only did Anthem’s Indiana CEO Larry Glasscock receive a $42.5 million dollar bonus on top of his base salary of $3.7 million, other top Hoosier executives pocketed $4 to $16 million dollars each. The CEO of WellPoint in California, Leonard Schaeffer, retired on a package valued at $337 million. I am not making this up.

At the close of 2009, hope is gone that we will see universal health coverage come out of this Congress. Single payer advocates like myself never really believed it might come this time around, but couldn’t help but get our hopes up. It remains to be seen whether any bill that passes will end up being an incremental step in the right direction, but it won’t be a slippery slope.

Our Hoosier “Democratic” Senator Evan Bayh has distinguished himself as a hindrance to any reform bill that is not in the best interests of the hometown insurance company. Although he and his wife Susan proclaim no conflict of interest, she sits on the WellPoint board. Her compensation for serving on that board, as reported to the Securities and Exchange Commission, is $330,000 a year, more than twice Evan’s salary of $160,000 as a senator.

Progressives disagree about how to proceed from here. I spoke with T R Reid a few weeks ago in Boston. He is the author of the PBS Frontline Sick Around the World and a new book, The Healing of America. He makes a strong case for getting to universal care while keeping the private insurance industry, although he makes it clear that no nation has achieved universal care using for-profit companies.

Can universal health care be accomplished within our system of for-profit insurance companies? I’ve always favored the single payer approach, which seems more feasible to me than taming the insurance behemoths. Reid thinks we’ve got to consider the taming approach, so some of us decided to put that idea to the test, in the form of a shareholder resolution.

We delivered the resolution on that dark and rainy day. Now we await word about whether the SEC will require WellPoint to include it in the proxy for the annual meeting. It is a long shot, to be sure. But if Congress won’t take on the insurance industry, then someone has to. Here is our resolution, couched in the language our legal advisors recommended and adhering to all SEC requirements:

SHAREHOLDER RESOLUTION

Whereas, the United States allows too many people to suffer and die due to lack of adequate health insurance and this is threatening the economic stability of the country; and

Whereas, no country has achieved universal healthcare through for-profit health insurance; and

Whereas, in written statements WellPoint supports “the best healthcare value for our customers” and promises “to advocate for responsible healthcare reform”; and

Whereas, WellPoint has actively opposed President Obama’s healthcare reform efforts; and

Whereas, WellPoint was a nonprofit insurance company before it demutualized, raised capital through stock offerings, merged with, acquired, and demutualized other nonprofit Blue Cross/Blue Shield companies; therefore be it

Resolved, that the shareholders of WellPoint urge the board of directors to launch a feasibility study for returning to nonprofit status. This study, conducted at reasonable cost, with results made available to the stockholders, omitting any proprietary information, should be completed within nine months of the 2010 shareholder meeting.

Supporting Statement:

Investors are concerned about the effects of runaway health costs on the economy, and the crisis of over 46 million uninsured. Recent studies show 45,000 people a year die because they lack health insurance (American Journal of Public Health 9/17/09). Tens of millions more are underinsured, able to afford coverage only through policies with huge deductibles and out of pocket expenses. The impact of high deductible policies is seen in recent bankruptcy data showing 62% of personal bankruptcies caused by illness and medical bills, but 78% of those declaring bankruptcy for medical reasons had insurance when they became ill (American Journal of Medicine 8/09). WellPoint has been a leader in marketing high deductible policies, specifically under the Tonik label.

From 1999 to 2008 American health insurance premiums increased 119% while workers earnings and overall inflation rose 30% (Bureau of Labor Statistics). Businesses cannot continue to afford covering their employees. The Hewitt Associates study “The Road Ahead: 2009” found 1 in 5 employers are planning to drop health benefits in the next 3 to 5 years. This system is unsustainable.

Studies show 31% of US healthcare spending is attributed to overhead. In comparison, Medicare runs 3.1% overhead. Most other developed nations spend less than 10% on overhead (New England Journal of Medicine 8/21/03). Nations with universal systems spend about half what we spend on a per capita basis and have better health outcomes (Organization for Economic Cooperation and Development).

WellPoint reported its third quarter 2009 medical loss ratio at 81.1%. Medical loss ratio is the percentage of premiums that actually pays for care, and thus corresponds to 18.9% of premiums for overhead and profit. Although this is good for WellPoint’s profitability and share price, it supports the argument that for-profit health insurance is a major reason for the discrepancy in overhead expenses between the US and other countries.

WellPoint’s reputation has suffered as a consequence of the negative publicity surrounding its efforts to oppose healthcare reform. This resolution could change that.

I’ll keep you posted on our progress.

Rob Stone, MD is an emergency physician and Director of Hoosiers for a Commonsense Health Plan in Indiana. He is on the board of directors of Physicians for a National Health Plan.

 

 

 

More articles by:
October 16, 2018
Gregory Elich
Diplomatic Deadlock: Can U.S.-North Korea Diplomacy Survive Maximum Pressure?
Rob Seimetz
Talking About Death While In Decadence
Kent Paterson
Fifty Years of Mexican October
Robert Fantina
Trump, Iran and Sanctions
Greg Macdougall
Indigenous Suicide in Canada
Kenneth Surin
On Reading the Diaries of Tony Benn, Britain’s Greatest Labour Politician
Andrew Bacevich
Unsolicited Advice for an Undeclared Presidential Candidate: a Letter to Elizabeth Warren
Thomas Knapp
Facebook Meddles in the 2018 Midterm Elections
Muhammad Othman
Khashoggi and Demetracopoulos
Gerry Brown
Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy
Christian Ingo Lenz Dunker – Peter Lehman
The Brazilian Presidential Elections and “The Rules of The Game”
Robert Fisk
What a Forgotten Shipwreck in the Irish Sea Can Tell Us About Brexit
Martin Billheimer
Here Cochise Everywhere
David Swanson
Humanitarian Bombs
Dean Baker
The Federal Reserve is Not a Church
October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
Marvin Kitman
The Kitman Plan for Peace in the Middle East: Two Proposals
Weekend Edition
October 12, 2018
Friday - Sunday
Becky Grant
My History with Alexander Cockburn and The Financial Future of CounterPunch
Paul Street
For Popular Sovereignty, Beyond Absurdity
Nick Pemberton
The Colonial Pantsuit: What We Didn’t Want to Know About Africa
Jeffrey St. Clair
The Summer of No Return
Jeff Halper
Choices Made: From Zionist Settler Colonialism to Decolonization
Gary Leupp
The Khashoggi Incident: Trump’s Special Relationship With the Saudi Monarchy
Andrew Levine
Democrats: Boost, Knock, Enthuse
Barbara Kantz
The Deportation Crisis: Report From Long Island
Doug Johnson
Nate Silver and 538’s Measurable 3.5% Democratic Bias and the 2018 House Race
Gwen Carr
This Stops Today: Seeking Justice for My Son Eric Garner
Robert Hunziker
Peak Carbon Emissions By 2020, or Else!
Arshad Khan
Is There Hope on a World Warming at 1.5 Degrees Celsius?
David Rosen
Packing the Supreme Court in the 21stCentury
Brian Cloughley
Trump’s Threats of Death and Destruction
Joel A. Harrison
The Case for a Non-Profit Single-Payer Healthcare System
FacebookTwitterGoogle+RedditEmail