When Health-Care: Providers Become Banks

by Bill Onasch / November 2008

Not all corporations are suffering in this time of crisis. The health-insurance robber barons seem to be doing okay, thank you.

WellPoint, the largest component of the Blue Cross Blue Shield Association, is now the biggest, with nearly 35 million customers. Last year their premium revenue was about 56 billion. Second-place United Healthcare, the corporate sponsor of the AARP, had nearly 10 million fewer members but racked up even more premiums—nearly 69 billion.

United was not only able to get more money up front—they kept more of it. The industry has a revealing term for what actually gets spent on real health care—medical loss ratio. United paid out 80.6 percent of their revenues in such "losses" compared to WellPoint’s 82.4. Number-three Aetna held down such spending to 79.5 while number-four Cigna did better yet, allowing only 78.5 percent to be pried from their fist.

Awash in cash, the health-care barons decided that the banker barons shouldn’t get all the gravy from the Health Savings Account (HSA) scam that Congress made much more attractive in 2003 and is widely promoted by politicians of both boss parties.

They were a centerpiece of John McCain’s health plan. And Barack Obama said in an interview with the American Academy of Family Physicians, "Health Savings Accounts may be a helpful way of saving taxpayers money in the current health care environment."

John Casillas, director of the Medical Banking Project, explained HSA magic to The Los Angeles Times:

"There's fees for managing the account, transaction fees, fees for investing the funds. You're going to see many billions of dollars moving from premium payments to professionally managed investment funds under HSA rules. Some people think that banks are going to threaten health plans by replacing them in the marketplace."

WellPoint decided to reinvent itself as a financial services company, targeting this rich vein of HSA accounts. At first the Federal Reserve folks gave them a hard time. Slow to get with the program, they thought this company with its own medical facilities, and mail order pharmacy, as well as administering Blue Cross plans, was part of the health-care industry, not a bank.

But it took only a few winks and nudges to convince the Fed that those activities were merely "complementary" to its main business—financial services. It pledged to limit them to less than 5 percent of total revenue.

The NewYork Times commented, "That a medical insurer would agree to keep a lid on healthcare expenditures so it could get approval to open a bank illustrates a fundamental change in the industry: Insurers are moving away from their traditional role of pooling health risks and are reinventing themselves as money managers—providers of financial vehicles through which consumers pay for their own healthcare."

So what happens when your doctor tells you that you need major surgery and come to find out your HSA went down the tube in a failed loft project in SoHo? We may not be far away from hearing such horror stories.

We need a different "fundamental change." Instead of being a commodity, or a financial service, health care should be a publically financed human service provided to all—as it is in most countries.