b'Associate NewsWMI Word continuedIm sure there are plenty of people who couldnt care less how much pharmaceutical companies chargeIn a simplified mathematical equation (and assuming for their drugs since they arent paying the cost anda profit and not a loss), an insurance companys basic they believe its the lesser of the evils whether theirbusiness model can be summed up as follows:premium dollars are pocketed by drug companiesClaims + Overhead + Profit = Premium.or health insurance companies. That logic is short- As claims increase, profit decreases until it goes to sighted and misguided because it ignores the realityzero. At that point, premium must be increased or the that they would pay lower health insurance premiumsinsurance company will go broke. Since theres only if drug costs were brought in line with other morea 3% profit margin in the system to begin with, the elastic products. relationship between claims and premium is nearly Ive never been an apologist for the health insur- dollar for dollar, so when one dose of a particular ance industry, but contrary to popular belief, insur- drug therapy adds $3.5 million to the claims side of ance companies dont have a printing press in thethe equation, those paying premium must contribute basement that prints money whenever claim costsan additional $2.86 million to the premium side of the increase. Our business model is basically a fairlyequation just to maintain equilibrium. This isnt fair, simple math calculationwe collect premium,reasonable or sustainable.we pool risk, and we pay claims. When claim costsNow for my legal disclaimerthe views expressed increase, premium increases must follow. When drugin this article are my personal opinions and are attrib-costs skyrocket, premiums must necessarily rise.utable solely to me and to no other person or entity. I When health insurance premiums can go no higher,make no secret of the fact that while I am amazed and the death spiral ensues and the system collapses. Itsgrateful for the medical and pharmacological contri-really that simple. butions of drug manufacturers, I abhor the way they As I examined in a recent WPMA News article, 1theprice their products. In fact, I would even go so far to overwhelming majority of premium dollars collectedsay that in my personal opinion, it is unethical, im-by health insurance companies (81.7%) goes directlymoral and disgusting that drug manufacturers profit at to pay for health care costs incurred by their mem- such lucrative levels from a persons health misfor-bers. Of the balance, 15.3% goes to insurance compa- tune. I would (somewhat laughingly and entirely ny overhead, and a measly 3% (in a good year) goestongue in cheek) call on Congress to do something to profit. Needless to say, profit is not guaranteed,about this; but alas, we all know that Congress is so if claim costs spike, the insurance company losesimpotentat least until such day as the health insur-money. When an insurance company loses money, itance system collapses due to unfettered greed.must increase premiums or it will go insolvent.1 Just how Greedy is my HealthInsurance Company; www.wmimutual.comWordwww.wmimutual.com/Just How Jpublications/pdf/2021/WPMA_ For most people, GRBy David Leo,F EEDY Is My Health IArticle_(3-21).pdf. its a foregone conclusion that health insurance companies and President oftheir executives are greedy weaselssecond only to lawyers. As an insurance company WMI Mutualexecutive (and a lawyer), Id like to ask that you indulge me a few minutes of your timensurance ComInsurance Companyto rebut that unfounded (albeit convenient) fallacyat least insofar as its application toTo add perspective to healthcare spendingGRAPH 3& WMI TPAhealth insurance companies. Before we start, please take a moment to answer the follow- in the U.S., I would like to take a look atpanying question:Question:The average net pro\x1fdata from the National Institute for Health A:3%B:5%C:10%Care Management Foundation (NIHCM) t of U.S. health insurance companies is ___% of revenue.and the Agency for Healthcare Research and Quality (AHRQ). This data identi es huge Hint: According to Yahoo! Finance, the most recent net proD: 12%E:15% discrepancies between those who use very for Apple, Inc. (AAPL) is 21.3%; The Walt Disney Company (DIS) is 13.8%; Berkshire Hathaway, Inc.little of the health insurance premium dollars If you have questions(BRK.A), Warren Buffets conglomerate, is 12.8%; Johnson & Johnson (JNJ) is 21.0%, and Alphabet, Inc.and those who use extraordinary amounts. (GOOG), the parent company of Google, is 19.0%. t margin (%) (de ned as net incomerevenue)According to the NIHCM data, nearly one-Ill provide the answer to the question in due course, but Id likeproquarter of all money spent on healthcare is to illustrate where the health insurance premium dollar goesrst.used by a mere one percent (1%) of the I would also like to show you how much of the health insur- population (see, Graph 2). The AHRQ data about this article orance premium dollar is used by so few, and why health caret enjoyed by many other industries and companies. So pegs thisgure at a whopping $127,284/reform must address health insurance costs for it to be effective.the answer to the question of how much pro t health insuranceperson per year (see, Graph 3). The top 10% Finally, many years ago I heard the saying, Health insurance iscompanies in the U.S. make on average is A: 3%hardlyof individuals are responsible for using two-expensive because health care is expensive. I hope that once wegreedy and far from weaselly. I should note thisgure is consis- thirds of all healthcare spend ($38,980/per-would like to discussdispatch with a few myths that are easy to believe and dif culttent with the medical loss ratio (MLR) requirements of theson per year), while the bottom 50% only use to dispel, you will see that maybe, just maybe, health insurance1 Affordable Care Act (the ACA or Obamacare) which man- G 3% of healthcare spend at a meager $385/companies arent such greedy properson per year.t mongers after all. date that health insurance companies spend 85% of all premiumRAPH 2your companys healthAccording to data compiled from Americas Health Insuranceon medical expenses, and that insurers refund premium if they dont satisfy that threshold. The 85%gure drops to 80% for Plans (AHIP), nearly 82% of every premium dollar goesindividuals and small groups, but thats still a pretty stringentThere are many ways (short of a directly to pay for the following healthcare expenses: prescrip- target! I should also note that health insurance companies thatsingle-payer universal healthcare tion drugs (21.5%); inpatient medical care (19.0%); and otherexperience an adverse claims year are required to cover excesssystem) to tackle the problem of health-insurance progam, feelmedical services (41.1%) (see, Graph 1). Insurance companiesG losses with policyholder surplus or some other funding source,care affordability in the U.S. (e.g., allocate 15.3% for overhead, which includes things likeso its a heads-we-win / tails-you-lose proposition. government regulation of medical costs, salaries and bene ts, of ce space, agent commissions,RAPH 1PPO access fees, medical case management fees, pre- aggressive management of the medical free to contact me atscription drug card fees, and many additional expensescare of the sickest Americans, subsidiza-1that are paid to other third parties. That leaves a meretion or reinsurance of medical costs that 3% for pro t (in a good year)hardly the double-digitexceed a reasonable threshold, etc.), but (801) 263-8000 orIve gathered the majority of my information and documentationone thing is certain: unless and until we from several reputable sources: (1) Americas Health Insuranceaddress this problem, health insurance (h Planstps:/ ~n Whereihc.o doesrg/pu yourblica healthtions/ carethe-c dollaroncen go?trat (https://www. ion-of-u-s- ect the actual ahip.org/health-care-dollar); (2) the nonprofit, nonpartisanwill never appropriately re National Institute for Health Care Management Foundationrisk of the overwhelming majority of info@wmimutual. health-care-spending); and (3) The Agency for Healthcarethe people who purchase it, and it will Research andm Qualitynever be affordable to most Americans. publications/st533/stat533.pdf). If youre interested in accurateMoreover, as healthcare costs (and the information about(https://www.meps.ahrq.gov/data_files/ insurance premiums that track them) health insurancehealthcare cost drivers or the allocation ofAccording to PBS.org, there were an esti- rise at hyperin ationary levels, the U.S. compremiums, rather than anecdotal informationmated 331 million people living in the U.S.health insurance market will continue to documented and authoritative websites. in 2020. This means 3.3 million Americansspiral that has been an obstacle to afford-and political rhetoric, I would encourage you to visit those well- were responsible for $421 billion of health- struggle against the ever-present death 22 care spend, while the healthiest 165 millionable and manageable health insurance people (50 times that population) spent lesspremiums for decades, and meaningful than one-sixth of thatgure! This is a text- healthcare will continue to be out of book case of the 80-20 rule, and it clearlyreach for most people.illustrates the need to control the healthcareIf you have questionsww costs of these highest utilizers if we are everabout this article or w.wpma.com / Spring 2021 going to make healthcare (and health insur-would like to discuss ance) affordable to the rest of the population. your companys health WPMA News / Spring 2021insurance progam, feel free to contact me at (801) 263-8000 or info@wmimutual.com.23S46 www.wpma.com / Post WPMAEXPO 2023'