THE PROBLEM

BIG INSURANCE

The health insurance industry represents some of our nation’s oldest companies, for example, Cigna, originally formed in Pennsylvania in 1792 as INA (Insurance Co. of North America).

During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations in the 1930s. 

The first employer-sponsored hospitalization plan was created by teachers in Dallas, TX in 1929 (wiki).

However, from 2008 to 2018, the cost of health insurance has increased 242%, creating the current crisis for employer sponsored health plans.

This increase, driven primarily by the actual cost of care, is a result of our trust and faith placed in the hands of the insurance carriers who negotiate reimbursement rates through network negotiations with care providers (HMO and PPO), and Pharmacy Benefit Management (PBM) contracts.

These negotiated rates of reimbursement remain private data of each network, and in many cases, do not represent the best interest (lowest cost) for the insured individual.  Each insurance carrier develops premium rates based on the expected “net” paid claims, with additional fees applied for administrative expenses, profit, and other operational overhead.  It is safe to say, when healthcare costs increase, insurance company profits increase as well.

In a truly transparent healthcare economy, we would be able to review an insurance carrier’s reimbursement rate “schedule” with each participating healthcare provider and make informed decisions when choosing one. 

Some insurance carriers are proactively supporting this strategy and providing completely transparent data to their insured members.  These are the carriers we exclusively work with at Loxley.  Others are not, and in many cases, earn profit as a % of paid claims through ownership of PBMs, networks, and other “shared” contracts. 

In the past ten years, we’ve seen an explosion in Big Insurance’s stock values:

  • United Health Care (UNH) up 896% since July 2009
  • Cigna (CI) up 605% since July 2009
  • Anthem (ANTM) up 478% since July 2009
  • Humana (HUM) up 819% since July 2009
  • Outpacing the S&P 500 (^GSPC) by nearly 4x.

If you are one of the lucky investors, you may have paid yourself back.  But for those who depend on a paycheck that has been eroded by health insurance premiums, we need to find a more transparent way to pay for healthcare.  If your employer works with Loxley, you’ll know where your health insurance premiums are spent.

BIG HOSPITALS

Rx BENEFT MANAGERS (PBMs)