Health Insurers Making Record Profits as Many Postpone Care

 

The UnitedHealth Group, one of the largest commercial insurers, told analysts that so far this year, insured hospital stays actually decreased in some instances. In reporting its earnings last week, Cigna, another insurer, talked about the “low level” of medical use.

Yet the companies continue to press for higher premiums, even though their reserve coffers are flush with profits and shareholders have been rewarded with new dividends. Many defend proposed double-digit increases in the rates they charge, citing a need for protection against any sudden uptick in demand once people have more money to spend on their health, as well as the rising price of care.

Even with a halting economic recovery, doctors and others say many people are still extremely budget-conscious, signaling the possibility of a fundamental change in Americans’ appetite for health care.

“I am noticing my patients with insurance are more interested in costs,” said Dr. Jim King, a family practice physician in rural Tennessee. “Gas prices are going up, food prices are going up. They are deciding to put some of their health care off.” A patient might decide not to drive the 50 miles necessary to see a specialist because of the cost of gas, he said.

But Dr. King said patients were also being more thoughtful about their needs. Fewer are asking for an MRI as soon as they have a bad headache. “People are realizing that this is my money, even if I’m not writing a check,” he said.

For someone like Shannon Hardin of California, whose hours at a grocery store have been erratic, there is simply no spare cash to see the doctor when she isn’t feeling well or to get the $350 dental crowns she has been putting off since last year. Even with insurance, she said, “I can’t afford to use it.” Delaying care could keep utilization rates for insurers low through the rest of the year, according to Charles Boorady, an analyst for Credit Suisse. “The big question is whether it is going to stay weak or bounce back,” he said. “Nobody knows.”

Significant increases in how much people have to pay for their medical care may prevent a solid rebound. In recent years, many employers have sharply reduced benefits, while raising deductibles and co-payments so people have to reach deeper into their pockets.

In 2010, about 10 percent of people covered by their employer had a deductible of at least $2,000, according to the Kaiser Family Foundation, a nonprofit research group, compared with just 5 percent of covered workers in 2008.

Doctors, for one, say patients’ attitudes are changing. “Because it’s from Dollar 1 to Dollar 2,000, they are being really conscious of how they spend their money,” said Dr. James Applegate, a family physician in Grand Rapids, Mich. For example, patients question the need for annual blood work.

High deductibles also can be daunting. David Welch, a nurse in California whose policy has a $4,000 deductible, said he was surprised to realize he had delayed going to the dermatologist, even though he had a history of skin cancer. Mr. Welch, who has been a supporter of the need to overhaul insurance industry practices for the California Nurses Association union, said he hoped his medical training would help him determine when to go to the doctor. “I underestimated how much that cost would affect my behavior,” he said.

Dr. Rebecca Jaffe, a family practice doctor in Wilmington, Del., said more patients were asking for the generic alternatives to brand-name medicines, because of hefty co-payments. “Now, all of a sudden, they want the generic, when for years, they said they couldn’t take it,” she said.

The insurers, which base what they charge in premiums largely on what they expect to pay out in future claims, say they still expect higher demand for care later this year. “I think there’s a real concern about a bounce-back, a rebound, in utilization,” said Dr. Lonny Reisman, the chief medical officer for Aetna.

Because they say they expect costs to rebound, insurers have not been shy about asking for higher rates. In Oregon, for example, Regence BlueCross BlueShield, a nonprofit insurer that is the state’s largest, is asking for a 22 percent increase for policies sold to individuals. In California, regulators have been resisting requests from insurers to raise rates by double digits.

Some observers wonder if the insurers are simply raising premiums in advance of the full force of the health care law in 2014. The insurers’ recent prosperity — big insurance companies have reported first-quarter earnings that beat analysts expectations by an average of 30 percent — may make it difficult for anyone, politicians and industry executives alike, to argue that the industry has been hurt by the federal health care law. Insurers were able to raise premiums to cover the cost of the law’s early provisions, like insuring adult children up to age 26, and federal and state regulators have largely proved to be accommodating.

But 2014 and 2015 are likely to be far more challenging, as insurers are forced to adjust to the law’s greatest changes, like providing coverage to everyone regardless of whether they have an expensive pre-existing condition. “I think they’re going to go through a winter,” said Paul H. Keckley, executive director of the?Deloitte Center for Health Solutions, a research unit of the consulting firm Deloitte.

And while the slowing down of demand is good for insurers, at least in the short term, the concern is that patients may be tempted to skip important tests like colonoscopies or mammograms. The new health care law will eventually prevent most policies from charging patients for certain kinds of preventive care, but some plans still require someone to pay $500 toward a colonoscopy.

In recent times, insurers have prospered by pricing policies above costs, said Robert Laszewski, a former health insurance executive who is now a consultant in Alexandria, Va. The industry goes through underwriting cycles where the companies are better able to predict costs and make room for profits. “They’re benefiting from a very positive underwriting cycle,” he said.

“Maybe managed care is finally working,” he said. “Maybe this is the new normal.”

Still, he emphasized, health care costs, even if they are rising at 6 percent or 7 percent a year, are increasing at a much faster pace than overall inflation. “We haven’t solved the problem,” Mr. Laszewski said.

Record Water for a Mississippi River City

He was staring at a calm puddle of water in which his house sat. A man standing beside Mr. Buck’s mailbox was casting a fishing line into a neighbor’s yard.

“It never came this far,” said Mr. Buck, a 21-year-old college student. “The farthest it ever came was the backyard of that house back there.”

The city of Vicksburg sits safely on lofty bluffs, except where it does not. The Kings neighborhood, where Mr. Buck lives in the north part of town, is one of the places where it does not.

Sunday in Kings was, for the most part, as it is in any other neighborhood, full of lawnmowers, barbecues and men standing around talking about nothing in particular. The difference was the muddy lake that was slowly consuming the neighborhood from the back.

Variances in elevation that would have gone unnoticed a few weeks ago now separate those who are nervous but dry from those whose houses are submerged nearly to the eaves. The water was not rising, residents said, so much as it was spreading, quietly. And the river that had pushed the water here was churning ferociously.

Around 10 a.m. on Sunday, according to officials from the Army Corps of Engineers, the river broke the record elevation set here during the flood of 1927, rising to 56.3 feet, 13 feet above flood stage and 1.2 feet below the predicted crest on Thursday. It was flowing by at a rate of nearly 17 million gallons a second, which is the highest rate it is likely to reach in its entire race down to the Gulf of Mexico.

Those numbers may be nerve-racking for those along its banks, but the weekend also brought some relatively good news: the failure of a predicted rain storm to appear has resulted in a lower estimated crest downriver at Natchez.

Furthermore, the Yazoo River, engorged with Mississippi backwater, had been projected to overtop its levees at some point this weekend, flooding 285,000 acres of delta farmland and threatening some anxious country towns. But the overtopping, designed into the system as a sort of relief valve, has not happened yet.

If the Mississippi comes in a few inches lower than predicted as it passes Vicksburg, the overtopping may not happen at all.

“It’s going to be really close,” said Robert Simrall, the chief of water control for the Vicksburg district of the corps.

These yardsticks are more or less irrelevant for the residents of Kings. While the river has been indifferent to income, folding over multimillion-dollar homes and valuable farmland in the delta along with single-wide trailers in Kings, the consequences for rich and poor vary considerably.

“Out of the whole community, I would say it’s probably three families with flood insurance,” Mr. Buck said.

The worries here are as much about the water as what it will bring in the weeks it sits here. Snakes, of course. Just about everyone in the neighborhood knows someone who has recently seen an alligator, or killed one, or lost a dog to one. More acute is the worry about who might come to their homes if they have to evacuate, and what those people might do or take.

The traffic was slow along Washington Street here, as gawkers pulled off on the increasingly narrow shoulder, emerging in Sunday clothes to take pictures of an old brick church that itself was undergoing something of a full-immersion baptism.

“This is ridiculous,” said Tawanna Bush, a 36-year-old waitress at a Cracker Barrel restaurant, looking at the top third of her uncle’s house. “Is it a sign?”

“Yeah, it’s a sign,” said Jackson Floyd, 49, offering the practical fatalism of those who have known hard luck. “It’s a sign that it’s time to move and get another house.”

Catrin Einhorn contributed reporting.

Media Decoder: Major Record Labels Settle Suit With LimeWire

Ending a five-year court battle over music piracy, the major record companies on Thursday settled a copyright infringement lawsuit with LimeWire, a popular file-sharing network, for $105 million, the Recording Industry Association of America announced.

In the suit, filed in 2006, the labels and the R.I.A.A., their trade group, accused LimeWire of running a Web service “devoted essentially” to piracy by allowing users to upload and download songs without permission. LimeWire began in 2000, and the labels contend that Mark Gorton, 44, the site’s creator and a defendant in the case, continued to operate it even after the Supreme Court ruled in 2005 that a similar service, Grokster, could be held liable for infringement.

Although the $105 million settlement is far from the $1.4 billion the labels had sought as a maximum penalty, the companies are hoping that the case will act as a deterrent to further piracy since Mr. Gorton, a former Wall Street trader with millions in personal assets, will also face liability.

“We are pleased to have reached a large monetary settlement following the court’s finding that both LimeWire and its founder Mark Gorton personally liable for copyright infringement,” Mitch Bainwol, the R.I.A.A.’s chairman, said in a statement. “As the court heard during the last two weeks, LimeWire wreaked enormous damage on the music community, helping contribute to thousands of lost jobs and fewer opportunities for aspiring artists.”

Five years ago, Kazaa, another peer-to-peer file-sharing system, settled a suit with the major record companies for $115 million.

In the suit, the labels identified more than 9,000 recordings made since 1972 that had been traded on LimeWire without permission and sought damages of up to $150,000 for each song. Judge Kimba M. Wood of United States District Court in Manhattan ruled a year ago that LimeWire had violated copyright, and when the settlement was reached, the case was in trial to set damages.

In October, Judge Wood ordered that most of the service’s functions be disabled, and the company said it was shutting down on Dec. 31.

LimeWire had argued that illegal file-sharing was not solely responsible for the music industry’s woes, pointing to CD counterfeiting, bankruptcies of music retailers and other problems.

“The record companies know and have known that their problems started well before LimeWire,” Joseph Baio, LimeWire’s lawyer, told the jury in his opening statement at the damages trial.

On Wall Street, Mr. Gorton co-founded a hedge fund that in 2007 had a reported $117 million in assets.