A recent story in the Guardian reveals the statistics on how CEO pay at the largest US corporations has skyrocketed over the last few decades.  The Guardian story says in 1965, CEO pay was 20 times that of workers.  That would mean if a worker made $30,000.00 per year, the CEO would be making about $600,000.00.  However, today CEO pay has risen to an average of 312 times that of the average worker.  Therefore, if a worker is making $30,000.00, the CEO would be making $9,360,000.00.

The Guardian story gives a couple of specific examples, including the McDonald’s CEO making 3,101 times the average McDonald’s worker and the Wal-Mart CEO making 1,188 times the average Wal-Mart worker.  These numbers are shocking, but it goes further.  The CEO’s of the top 350 companies earn 5.5 times the amount earned by the average earner in the top one-tenth of one percent of earners.

Putting aside the politics of these statistics, it makes one wonder:  have CEO’s gotten this much better since 1965?

I believe this phenomenon is directly relevant to the way in which big companies treat their customers, and this includes the way insurance companies treat their policyholders.  When the people at the top of a company stand to become mega-wealthy if the company is more and more profitable, then those people (who are the ultimate decision makers on company direction and culture) will seek company profits at all costs.

To be sure, insurance companies are in business to make money.  And the insurance industry, in theory, serves an important societal purpose.  But if the insurance industry is nothing more than a profit-at-all costs behemoth, and the industry’s duty of good faith and fair dealing to its policyholders/customers is subjugated to the chase of the almighty dollar, the important societal purpose served by the insurance industry goes unfulfilled.  Insurance company CEO’s are making millions and millions of dollars every year, much of it in profit-based bonuses, stock options, etc.  Are insurance companies keeping their mission of providing security and peace of mind to their policyholders at the top of their priority lists?

 

CNN’s Wayne Drash (@drashmanCNN) has written a series of gut-wrenching, infuriating and telling stories recently regarding the health insurance industry’s treatment of policyholders.  They illustrate how profit is a more powerful motivator to the health insurance industry that policyholders.  Anyone interested in this issue specifically or responsible corporate behavior in general should take a look at Mr. Drash’s work.

In the most recent of these stories, Mr. Drash tells the story of Erika Zak, a 38-year-old mother whose stage 4 metastatic colon cancer had spread to her liver.  Without a liver transplant, Erika’s doctors say, she would die.  She is in the end stages of liver failure and her oncologists fear for her life every day.  After Erika was evaluated by numerous highly qualified doctors, it was determined her only chance of survival was a liver transplant.  She and her family rejoiced when she was put on the liver transplant recipient list.

That joy was short-lived.  Soon thereafter, UnitedHealth denied coverage for the liver transplant.  Erika and her family didn’t take no for an answer, however, and fought UnitedHealth at every turn, in every way they knew how.  All they wanted was what they knew Erika deserved, a chance at life with a new liver.  UnitedHealth was persistent in its denials, even in the face of the medicla evidence and Erika’s dire need for treatment.  To their credit, Erika and her family didn’t quit.  They wrote scathing, heartfelt letters to the CEO of UnitedHealth.  These fell on deaf ears.  The suffering they went through was tremendous, and this affected Erika and her family.  Then, incredibly, without explanation (even to CNN when asked) UnitedHealth changed its position and agreed to pay for Erika’s liver transplant.  Now Erika is waiting for a donor liver to come available. Mr. Drash’s storytelling of Erika’s journey is well worth the time to read.  It’s a real morality tale.

Here’s hoping one comes available soon so Erika and her loving family and her little girl can enjoy a long and happy life together.  Everyone should be pulling for Erika.  I certainly am.

This travesty begs the question:  Why should a person in Erika’s shoes have to beg and cajole an insurance company to provide the coverage she is entitled to?  The answer:  she shouldn’t.  If there is coverage for Erika’s transplant under her UnitedHealth insurance policy now, there has been all along.  Why would UnitedHealth cause such pain and sorrow before reluctantly agreeing to pay?  Why was it like pulling teeth for Erika to get the life-saving treatment she has always been owed?

Maybe, just maybe, the profit motive of the insurance company has something to do with it.  I don’t know what Erika’s transplant and the treatment associated with it would cost, but I would imagine the bills would be huge to a normal person.  Not to UnitedHealth, though.  No one health insurance claim will move UnitedHealth’s financial needle, but health insurance companies are good at making money.  So they find every opportunity they can to squeeze the water out of their claim costs.  Every claim is an opportunity to do so, especially the big ones like Erika’s.

David Wichmann, UnitedHealth CEO

Like its competitors in the health insurance industry, UnitedHealth has perfected the art of making money.  Its 2017 financial results tell that story.  UnitedHealth’s revenue for 2017 topped $200 billion for the first time ever.  That’s over $22.8 million in revenue per hour.  UnitedHealth made profit of over $10 billion in 2017.  That’s over $27 million of profit per day and $1.1 million of profit per hour.  The executives at UnitedHealth have done pretty well for themselves too.  The total executive compensation at UnitedHealth for 2017 was up by 34.1%, and the compensation paid to David Wichmann (the CEO) went up by 41% in 2017.  Mr. Wichmann was paid over $17 million in 2017.

What a breathtaking contrast.  A young mother dying because a giant corporation won’t pay for her life-saving health care, while the executives of the company (who are ultimately responsible for the way in which the company treats its policyholders) become obscenely wealthy.  This is the state of health care in America today.

If you follow the money, you find out why insurance companies disregard their duty of good faith.  A sickening morality tale if there ever was one.

 

CNN just ran an incredible story by Wayne Drash (see it here) on a health insurance claim denial by one of the country’s largest insurers, Aetna.  The story involved the case of Gillen Washington, a 23-year-old Californian, who is represented by attorney Scott Glovsky.  Apparently, Aetna denied medical treatment to Gillen based on the opinion of an Aetna-employed doctor who had not even read the medical records on Gillen.  In fact, the Aetna doctor testified in his deposition that as a matter of practice in his job reviewing policyholders’ claims at Aetna, he never reviewed the medical records of the policyholders.  Mr. Glovsky brought a lawsuit on Gillen’s behalf, and it is set to go to trial this week.

Now, the Insurance Commissioner in the State of California has opened an investigation into Aetna’s claim-handling practices.  The commissioner expressed concern over the Aetna doctor’s testimony and apparently intends to look into the matter.  Aetna denies any wrongdoing.

The CNN story quoted Dr. Arthur Caplan, founding director of the division of medical ethics at New York University Langone Medical Center, as describing Aetna doctor’s testimony as “a huge admission of fundamental immorality.  People desperate for care expect at least a fair review by the payer. This reeks of indifference to patients.”  CNN also quoted Dr. Caplan saying the  the testimony shows there “needs to be more transparency and accountability” from private, for-profit insurers in making these decisions.