Why Is Health Insurance So Expensive?

The predatory practices of the health insurance industry are one reason. The Boston Globe is reporting today that Humana Inc, one of the bigger insurers involved in providing the new Medicare drug benefit with some 2,000,000 seniors signed up in seven states, is going to raise the price for its Standard prescription drug coverage plan by 130% in Massachusetts.

The more than two million senior citizens nationwide who signed up last year for Humana Inc.’s least expensive Medicare prescription drug plan face average premium increases of 60 percent — and in seven states, increases of 466 percent — starting tomorrow . The higher prices will affect about 50,000 seniors in Massachusetts, where premiums are going up by 130 percent, from $7.32 to $16.90 a month.

Medicare added the prescription drug benefit in 2006, and in most states dozens of drug plans with varying coverage are available through insurance companies. Healthcare advocates say Humana kept its prices low in 2006 to gain market share. The strategy may prove lucrative, they say, because many seniors spent considerable time researching and selecting their drug insurance and were unlikely to switch plans for 2007, despite increased premiums.


“You have to state the obvious,” said David Shove , a stock analyst with Prudential Equity Group in New York. “You sell something cheaply and get a lot of customers, and then you raise the price to improve the profitability.”

Shove said the start-up of the Medicare prescription drug benefit “was a once-in-a-lifetime opportunity” for Humana to attract new customers.

Steve Findlay , a healthcare analyst with Consumers Union, the publisher of Consumer Reports, called Humana’s price increases a “bait and switch” tactic.

“That’s not an acceptable inflationary increase in prices,” he said. “That’s sucker them in and you just start raising the prices.”

As unconscionable as more than doubling the price the second year of the program may be, it’s even worse in other states.

Hardest hit are seven Midwestern and Western states, where monthly payments are going up 466 percent, from $1.87 to $10.60. The cost for Humana Standard is going down in just three states — Georgia, Louisiana, and South Carolina. (emphasis added)

Yes, Humana’s plan is still fairly inexpensive – for now – but that’s hardly the point. Humana lied to its customers and lied to the govt when it submitted its bid to Medicare while telling Wall Street the truth.

In presentations to Wall Street, Humana said it planned to raise its profit margin on Medicare drug plans and Medicare Advantage plans from 2.5 to 3.5 percent in 2006 to 4 to 5 percent in 2007.

And then 10-15% in 2008? Who’s going to stop them?

Bait-and-switch is one of the most common of the many tricks corporations use to improve their profitability. I mean, why go through the agony of making a better product than your competition if you can take a short-cut and lie to your customers? If you make more money, what difference does it make how you do it? Wall Street doesn’t give a shit. Tell them you’re going to rip off your customers and they’ll applaud. Does it create a hardship for consumers? Who cares?

Under Part D, seniors who go without drug coverage will pay higher prices if they eventually decide to buy it. As a result, many seniors who did not need prescription drugs in 2006 signed up with Humana’s low-cost plan simply to avoid having to pay more if they needed coverage in the future.

“Some of them took the plan even though they were only taking aspirin,” said Nancy Roper , a volunteer for Action for Boston Community Development who counsels low-income seniors on drug plan choices. “Now, this jumps to $16.90 for 2007, and they’re calling and asking is it worth it. It’s a hardship.”

We’ve got to get hipper about stuff like this. The corporatocracy has no conscience but the bottom line. Humana is assuming that it can get away with this shit because most people won’t switch plans once they’re signed up even if they have the option, and they’re probably right.

[M]any seniors have not been as aggressive about comparing prices as they were when they signed up for 2006 coverage, causing many to stay with their current insurance, regardless of changes in costs and benefits.

“For many reasons, the Medicare population is not used to something that changes every year,” said Judith Stein , executive director of the Center for Medicare Advocacy, a group that works to increase access to Medicare benefits.

Well, we better goddamn well get used to it. As long as corporations think they can cheat us, they will. It’s easier. We need to get more proactive or we’re just sheep who deserve to be sheared.

3 responses to “Why Is Health Insurance So Expensive?

  1. There is a very interesting article apearing at eMaxHealth about health insurance and how the beneficiaries act as the Medicare Health Insurance drug coverage deadline neared, but also extended to february. It also discusses what help is available for medicare beneficiaries. The article appears in the Dec. 29th issue of eMaxHealth at http://www.emaxhealth.com/72/8834.html There is actually more on Health Insurance at http://www.emaxhealth.com/72/

  2. I had to insure all my children as well

  3. Pingback: Medicare Drug Benefit Turns Into Bonanza for Big Pharma «

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