2nd Quarter 2007 Benefits Corner

by Ken Smith, CRA's Benefits Chairperson

Insurance premiums soar 65.8 percent, 400 percent more than inflation

In this issue of Benefits Corner I address the growing concern -- shared with me by many of our retirees - which is associated with increasing health care costs and premiums.  At the same time, I also will discuss some of the ways Chevron continues to work with health care providers to minimize the impact of rising health care costs.

Dr. James Borders, in a recent article in Kentucky's Lexington Herald Leader, points to the fact that, nationwide, insurance premiums have increased 65.8 percent from 2001 to 2006. That is 400 percent more than inflation in the identical time span while physician reimbursements have fallen 36 percent just since 2004.

During that same period, the profitability of the three largest insurers - United HealthCare, Wellpoint and Aetna, which control 78 percent of all health care insurance -- has increased dramatically. 

United HealthCare's net earnings jumped 38 percent in the third quarter of 2006 alone.  UHC's CEO was paid $124.8 million in 2005, Wellpoint's CEO $25 million and Aetna's CEO $22.2 million.  And, they say that oil companies have ridiculous profits!

Why such extraordinary increases in health care premiums?   Paul Krugman, economist and economic reporter for the New York Times spoke to the problem in a recent column entitled "America's Health Insurance Racket".

In his column he refers to a recent report, released by the consulting firm of McKinsey and Co, which dissects the administrative costs associated with health care.  The report states that we spend $98 billion a year in excess administrative costs, more than half accounted for by marketing and underwriting.

A large portion also is spent seeking ways to avoid claims payment.  This in turn requires health care providers to spend billions on "denial management" in their attempt to get reimbursement.  This is one of the reasons why some of our retirees are seeing their long term physicians and hospitals threatening, and in some cases following through, on leaving the big three insurance providers.

Unfortunately, as Krugman points out, the "dysfunctional nature of our health insurance system, one in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill," is part of the growing health care crisis in this country.  In an environment, complicated by a government unable to take aggressive corrective action, it is critical for us, as retirees, to  have a company such as Chevron serve in a proactive manner to help keep our health care costs down. 

How does it accomplish that?  One important way is Chevron participates in purchasing coalitions to negotiate lower medical plan and prescription drug costs.  You have heard the adage that there is power in numbers.  Well, that's exactly what Chevron and other companies in the coalitions achieve.

Through aggressive negotiations with health care vendors, while continuously evaluating plan design changes, the corporation continues to provide the best value for the cost.  In addition, our Company works with other groups to monitor federal legislation and provide input that seeks to improve the ever changing Medicare regulatory quagmire.

In closing, I reiterate that keeping health care costs down is a two-way street.  We, as retirees, can also assist in this ongoing battle by making healthy lifestyle choices throughout the year.

Regular exercise along with a healthy diet can go a long way toward making each of us more fit and feeling better.  In addition, it's important to maximize your health plan coverage by becoming very familiar with your plan summary.  Learn what is covered and what is not.

Finally, review your bills carefully to ensure you are not paying for something that is not covered because of errors, either on the part of your physician or the plan administrator.