It has really been good that the US average annual increase in total health care costs in 2009 through 2011 was 3.9%, the lowest it has been in the 52 years the US Government has been collecting the data. Kudos to Kathleen Sebelius and to Obamacare.
However, with the baby boom generation now starting to reach retirement age, health care costs will be rising significantly. Thus, much more is needed to reduce them.
So what recently happened in the health insurance arena? Well, in California there have been several health insurance company proposals to increase their annual insurance premiums by more than 20%.
And in 2011 and 2012, where corporate earnings overall have been under pressure, the large Health Insurance Corps have increased their earnings by more than the average company. And with the Big 3.....UnitedHealth, WellPoint and Aetna.....having substantial stock buyback programs, the Earnings Per Share growth of these three companies are substantially higher than their earnings growth.
To illustrate this key latter point, let me show just how obscene this Earnings Per Share Growth has been from 2005 to 2011 for these three Health Insurance Giants:
..................................................Average........Earnings
............................................Common Shares......Per
.......................Net Income.......Outstanding......Share
.........................mils of $s.......mils of shares........$s
United Health
.....2011...............5,142..............1,087..............4.73
.....2005..............3,083..............1,333...............2.31
.....% Change.......+67%.............-18%...........+105%
WellPoint
.....2011...............2,647................365..............7.25
.....2005..............2,464................626...............3.94
.....% Change.......+7%...............-42%............+84%
Aetna
.....2011...............1,986................380...............5.22
.....2005..............1,573................606...............2.60
.....% Change......+26%.............-37%............+101%
These three huge Health Insurance Corps are taking a significant amount of their insurance premiums they receive from policyholders and buying back their own common stock. Many public companies buy back their own common stock, but these three huge Health Insurance Corps are taking the stock buyback program to a completely different level.
And this superb Earnings Per Share growth of these three huge Health Insurance Corps is what drives the financial wealth enhancement of the executives of these companies, since the Earnings Per Share growth drives stock prices, which is the primary compensation element of the executives of these Health Insurance Corps. And the health insurance policyholder is funding this Extravagant Executive Compensation by not just paying their high health insurance premiums, but also by paying them early.
The entire situation here is another case of "Health Insurance Greed Gone Wild".
Anyway, there is a recent US Democratic House Bill, with 45 sponsors and led by very effective members Jan Schakowsky and Henry Waxman, called "Public Option Deficit Reduction Act", which would both fairly and very effectively deal with the obscene Earnings Per Share growth of the large Health Insurance Industry in the past decade.
It would give consumers the choice to Opt Into a Government-run health insurance plan in Obamacare insurance exchanges. It doesn't require consumers to do so, it just gives them the choice to do it if they prefer to do so.
Why this is such a good idea is that it will reduce the country's total health care costs by a huge amount. Just the CBO-scored US Government health care cost reduction here is more than $100 bil over the next ten years, and growing by leaps and bounds after that first ten-year period. And yes, this means that the US Debt reduction over the next ten years is more than $100 bil, and would be a very wise spending reduction element in the upcoming financial sequester solution.
Because the Government-run health insurance plan will be cheaper than the large Health Insurance Corp plans, this will put pressure on these large Health Insurance Plans to reduce their health insurance premiums.
But it's not just the Government's US Debt load which will benefit from this House proposal. So will all insurance policyholders, including businesses, and particularly small businesses, which pay for much of the insurance premiums of their employees.
Despite this House Bill being a no-brainer in terms of its wise effectiveness in substantially bending down the long-term US health care cost curve, above all else, the person who will do his very best to stop it is Mitch McConnell in the US Senate, because the company that dominates the Kentucky landscape is Humana, another Health Insurance Giant. And how effective has McConnell been? Well, Humana's Pretax Income has grown dramatically from $993 mil in 2008 to
$2,235 mil in 2011.....yeah, that's up 125% in just three years.
