Let’s not forget that the ACA was in a sense an attempt to rehabilitate insurance companies such as Aetna and Humana that were among the worst corporate villains of the 1990s and early 2000s, given their ruthless efforts to deny coverage.
The Obama Administration has gone too far in treating the companies as partners rather than adversaries in the implementation of the ACA. Although the insurers ultimately went along with restrictions on their practices — in exchange for being given a captive customer base — they have not changed their stripes entirely.
They are clearly impatient with the ACA’s growing pains and have lost none of their yearning for profit maximization. Whereas in the past the insurers would refuse to pay for specific treatments and would decline to renew the policies of certain subscribers, now they drop out of certain exchanges or they jack up their premiums.
At the same time, the biggest insurers are seeking to exercise greater dominance over the entire system by acquiring their competitors. Those commenting on the rate increases usually fail to mention that Aetna announced plans to acquire Humana, and Anthem proposed to buy Cigna. The two proposed deals, worth a total of about $85 billion, would reduce the number of major for-profit health insurance companies to just three.
Fortunately, the Justice Department announced its opposition to the mergers back in July. Yet there is no reason to believe that the companies have given up. In fact, both the retrenchment in their exchange activity and the premium hikes should be seen as bargaining chips in the battle over the mergers. Anthem, for example, made this pretty clear during an investor call July when it linked an expansion in its involvement in the exchange market to approval of the Cigna deal.
Faced with a choice between giving three companies (UnitedHealthcare being the third) tremendous market power and seeing the big insurers leave the Obamacare exchanges entirely, the company would be better off with the latter — especially if the foolhardy decision to eliminate a public option is finally rectified.
Posted in Insurance | Comments Off on Resisting Insurance Industry Blackmail
Criminal Enterprises October 20th, 2016 by Phil Mattera
Most cases of corporate misconduct are forgotten soon after a fine or settlement is announced, but the Wells Fargo phony account scandal seems to have real staying power. The company had to pay $185 million in penalties. CEO John Stumpf was forced to resign and pay back $41 million in compensation after being lacerated in two Congressional hearings. The city of Chicago and the California Treasurer cut some business ties with the bank.
Now Wells is facing a more serious legal challenge. It’s been reported that California Attorney General Kamala Harris is considering criminal identity theft charges against the bank over the millions of bogus accounts and the related fees that were improperly charged to customers. The AG’s office has demanded that Wells turn over a mountain of documents about accounts created not only in California but also in other states when California employees were involved.
It’s too soon to say for sure, but this case and other potential criminal actions could have a catastrophic effort on Wells. Criminal cases against major banks are rare, and most of those are resolved through deferred prosecution or non-prosecution agreements that allow the corporation to avoid a conviction. An exception came last year when Citicorp, JPMorgan Chase and two foreign banks pleaded guilty to charges of manipulating the foreign exchange market. They had to get special waivers to continue operating in certain areas that normally exclude felons.
The Wells case may do more damage, given the scope of the misconduct and the fact that it involves the bank’s core business. In this way it is comparable to the scandal surrounding Volkswagen and its systematic fraud concerning emissions testing.
These two situations pose a challenging question: What should be done about a large corporation engaged in flagrant misconduct? Another monetary penalty is not going to make much difference. As Violation Tracker shows, even before the recent case Wells had paid out more than $10 billion in fines and settlements in some two dozen cases involving a variety of abuses.
Stumpf’s ouster was an important step, but is there any reason to think that the executives who remain are all that different? A boycott of the company’s services is merited, but it would have to be much bigger in scope to have a real impact.
The usual way that regulators and prosecutors handle criminal enterprises is to force them out of business, but these are usually relatively small operations. What should be done with an institution such as Wells, which has more than 260,000 employees, some 8,600 branches and offices, and 70 million (presumably real) customers?
The answer for dealing with Wells Fargo might be to break it up into a number of smaller companies that are kept under close supervision and barred from operating in riskier areas. In other words: use a variation of Glass-Steagall as a way of discouraging fraudulent behavior. Even better would be if these smaller institutions operated under employee ownership.
My point is that we need to get more creative in dealing with systemic corporate crime so we’re not forced to endure an endless series of scandals