Between 2000 and 2006, "health insurance company profits quadrupled."
Chris Van Hollen on Tuesday, January 18th, 2011 in comments on the House floor
Rep. Chris Van Hollen says insurance company profits quadrupled
As the debate over a Republican effort to repeal the health care reform law kicked into high gear on Jan. 18, 2011, Rep. Chris Van Hollen, D-Md., argued against repeal and began by citing a couple of statistics to set the stakes.
"I'm interested to hear my colleagues say that they can identify with all the problems in the health care system," Van Hollen said from the floor of the House. "Between the year 2000 and 2006, premiums in this country doubled, health insurance company profits quadrupled, and this Congress did nothing."
This statistic is nothing new in the health care debate.
In fact, we first visited a very similar claim when Sen. Jay Rockefeller, D-W.Va., wrote a Sept. 21, 2009, opinion piece for the Capitol Hill newspaper Roll Call in which he said, "Insurance companies have seen their profits soar by more than 400 percent since 2001, while premiums for consumers have doubled."
As we did then, we'll break this into two fact-checks. We'll deal with the claim about premiums in a separate item.
Here we'll address Van Hollen's claim that health insurance company profits quadrupled between 2000 and 2006. And we'll borrow heavily from our fact-check of that similar claim made by Rockefeller in September 2009.
Rockefeller took his numbers about insurance company profits from a study sponsored by Health Care for America Now. Researchers for HCAN looked at financial data submitted by 10 large, publicly held health insurers to the Securities and Exchange Commission, covering the years between 2000 and 2008. The 10 companies are Aetna, Amerigroup, Centene, CIGNA, Coventry, Health Net, Humana, UnitedHealth Group, Universal American Group and WellPoint.
HCAN is a liberal group that supported the Democratic health care reform efforts, so we checked a few of HCAN's numbers by looking at some of the original disclosure forms on the SEC website and found no notable discrepancies. So the study appears sound.
The researchers found that the collective profits of these 10 companies rose from $2.41 billion in 2001 to $12.87 billion in 2007 — a 466 percent increase, meaning that, over that period of time, they more than quadrupled.
We dinged Rockefeller a bit for cherry-picking years, because, if you used, instead, the years 2001 through 2008, the data show that profits rose from $2.41 billion to $8.40 billion — a 249 percent increase. That's still a whopping jump, but it's not as high as the increase Rockefeller cited. The general dropoff in the economy had a lot to do with the lower profits in 2008, said Alex Lawson, a health care researcher for Campaign for America's Future, a liberal group, who co-authored the HCAN study, in a 2009 interview with PolitiFact.
Meanwhile, there's another caveat for HCAN's study. The group didn't adjust the profit statistics for corporate takeovers. When big companies absorb smaller ones, the net effect may be to enlarge the profits of the biggest companies (including many of the 10 giants in HCAN's study) even as the total size of the health insurance industry — the broader entity that Rockefeller seemed to be referring to — stays roughly the same. While doing such adjustments would have been logistically difficult, and maybe even impossible, the fact that they weren't done puts limits on how this data can be interpreted.
A health industry analyst, Steve Shubitz of Edward Jones, told us in 2009 that consolidation is "a very large part of this overall increase" in the higher profits by the remaining 10 companies. "Of course, these companies have increased profits, too, outside of acquisitions, but nowhere near to the extent that's implied by those stats," Shubitz said.
Lawson acknowledged that the HCAN chart on profits does not address how much of an impact consolidation had on profits. But he added that the table actually comes from a study that specifically addressed the harm to competition caused by consolidation, so the group hardly ignored that issue. In addition, he defended the decision to use numbers unadjusted for consolidation. "That's what the market reacts to, and that's what they put in their annual report," Lawson said.
The insurance industry, for its part, argues that total health plan profits are less than one penny of the total national health expenditure dollar. "The data is clear that profits are not what is driving rising health care costs," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the leading health insurance trade group.
Back in 2009, we rated Rockefeller's claim Half True, noting that if he had carried the data forward to 2008 — an admittedly somewhat atypical year — the increase fell short of his stated quadrupling. But Van Hollen had a clearer reason to set the parameters between 2000 and 2006. Democrats regained control of the House in 2007. So it's fair for him to stop short of the 2008 figures. But as we noted when Rockefeller made a similar claim, the numbers Van Hollen used reflect 10 of the biggest companies as opposed to "insurance companies" in general. And the study did not adequately account for consolidation. But on balance, we rate Van Hollen's statement Mostly True.