But for the otherside see CNSNews.com report below

400 Percent Profit Increase for Health Insurers Cited by Health Care Bill Backers is Selective, ‘Meaningless’ Number, Say Analysts

(CNSNews.com) - In calling for health care reform, many Democratic congressmen say that private health insurance companies enjoyed 400 percent profit increases over the last eight years – a statistic generated by the liberal coalition group, Health Care for America Now (HCAN). But industry analysts say those numbers are selective and “meaningless” in terms of understanding profits.

“They are cherry-picking even their own meaningless data, because their chart shows profits dropped by 35 percent from 2007 to 2008, making the increase from 2000-2008 only 249 percent instead of 428 percent,” Dr. Robert Book, senior fellow for Health Economics at the conservative Heritage Foundation, told CNSNews.com.

“The fact that leaving off one year makes such a huge difference demonstrates how meaningless that particular calculation is,” he said. “Not to mention that if the 2007-2008 trend continues, profits will be back below their 2000 level very quickly [by 2011].”

Bert Ely, a financial analyst and monetary policy consultant at Ely & Company, Inc., told CNSNews.com: “The HCAN numbers are not a relevant measure of the profitability of the health insurers. The relevant profit measure is their profits per premium dollar collected. Those profits are just a few pennies per premium dollar.”

HCAN, an advocacy group whose steering committee includes liberal groups like the Association of Community Organizations for Reform Now (ACORN) and Moveon.org, recently published a report, “Premiums Soaring in Consolidated Health Insurance Market: Lack of Competition Hurts Rural States, Small Businesses.”

The report concluded that “profits at 10 of the country’s largest publicly traded health insurance companies in 2007 rose 428 percent from 2000 to 2007, from $2.4 billion to $12.9 billion, according to U.S. Securities and Exchange Commission filings.”

Several lawmakers have quoted those numbers to argue for a “public option” health care plan that would compete with private insurance companies to allegedly bring down health care costs.

Senate Commerce Committee Chairman John Rockefeller (D-W.Va.), whose office confirmed that he was using HCAN as a source, said insurance companies are “making so much money, it’s just ridiculous.”

“Insurance companies have seen their profits soar by over 400 percent since 2001 when premiums of consumers have doubled,” Rockefeller told CNSNews.com.

“That’s not what you want in a health care system,” he said. “Insurance companies can take care of themselves. Remember, they insure a lot of other things besides health care.”

Senate Majority Leader Harry Reid (D-Nev.) cited a similar 400 percent profit statistic. However, his office did not respond to CNSNews.com’s request for Reid’s source of information.

“There is no business in America that makes more money than the insurance industry --over the last 10 years their profits have been increased by 450 percent,” Reid said during a July 30 press conference on health care reform.

Avram Goldstein, research director for HCAN, provided CNSNews.com with the data that HCAN used to calculate the 428 percent profit increase figure. See chart here.

“The process was just math,” Goldstein told CNSNews.com. “We gathered the figures and compared the years.”

Goldstein also told CNSNews.com that ACORN, which financially backs HCAN, had nothing to do with their study.

“I’ve had no contact with anyone from or on behalf of our coalition member ACORN in conducting or assembling our research,” said Goldstein. “They are one of more than 1,000 organizations in our coalition and one of 21 members of our steering committee, none of which have had a voice in directing our data presentations.”

The group America’s Health Insurance Plans, or AHIP (formerly known as the American Association of Health Plans), is a trade association of nearly 1,300 health care insurance companies. It said that a study conducted by PricewaterhouseCoopers for AHIP showed that health plans had an average profit margin of 3 percent in 2007.

The American Hospital Association, a national organization that represents hospitals, their patients, and health care networks has reported that health insurance company profit margin increases reached 3.5 percent in 2004 but decreased to 2.5 percent in 2005 and 2006.

The AHIP says these data “set the record straight on health plan profits.”

Dr. Robert Book told CNSNews.com: “HCAN is picking a number that looks big but is really meaningless.”

Book noted that HCAN failed to include data from 2008 in its report, a time when health insurance company profits actually dropped.

“If profit is really small, any small change could still be a large percentage,” said Book.

Book also compared the statistics from AHIP and HCAN.

“They are really both looking at profit margins,” said Book. “AHIP is expressing them as a percentage -- I'm guessing as a percentage of total revenue, which would be reasonable. HCAN is taking the same numbers, selecting a few companies, adding up their profit (in dollars, not percent-of-revenue) and looking and how the dollars change between selected years.”

“In short, HCAN is starting with the same profit margin numbers, but is expressing them in a meaningless way,” said Book.

Ely also said the method HCAN used to gather its data is flawed and suggested a better way to measure profits.

“A far better measure of health-insurance profits that the public option supposedly would eliminate are after-tax profits as a percent of premiums paid to the insurance companies, such as the 3.5 percent figure cited by the American Hospital Association,” said Ely. “I cannot vouch for that number, but it does not seem too unreasonable.”

For example, the health insurance company Aetna states that its “after-tax profits as a percent of its revenues for the first half of 2009 were 4.5 percent, down from 5.9 percent for the first half of 2008,” said Ely. “To put these numbers in another light, 95.5 percent (100 percent - 4.5 percent) of Aetna's revenues in the first of 2009 were consumed in payments of their insured's medical bills, by the expense of running an insurance operation, and by the income taxes Aetna pays.”

He continued: “If those payments, expenses, and taxes had been just 4.7 percent higher (4.5 percent/95.5 percent), then Aetna would not have made any profit, which leads to this question: Why does anyone believe that a government bureaucracy will operate at anywhere near the efficiency of a for-profit entity or within 4.7 percent of the efficiency of a for-profit entity?”

“Quite likely, the ‘public option’ would operate far less efficiently and therefore would end up being far more costly than the present system,” said Ely.

Inquiries to HCAN for comment on this story were not returned."