Perhaps the insurance industry sees the scandals in Washington as a challenge, a motivating factor, a red flag thrust in front of the industry. How else to explain the daily news on malfeasance and wrongdoing on the part of insurers? Criminal indictments, revelations of unethical behavior, news of commission padding, retroactive rejection of applications, and sleazy products have all hit the mainstream media this year, and the latest may be the biggest yet.
From Insurance Journal comes the item that United HealthGroup and Chair/CEO Bill McGuire may be facing criminal charges linked to the allegations of back-dating of stock options. The Federal Attorney in New York is evidently investigating the good doctor et al, and those who know about such things see that as very bad news indeed for all involved.
Several individuals quoted in various articles noted that prosecutors tend to go after the really big companies as a deterrent to others who may be contemplating similar actions. And McGuire’s $1.5 billion payout certainly will get attention in the media.
UHG has not exactly endeared itself to providers either, making for smiles and high-fives all around in health system board rooms if and when criminal indictments come down.
What does this mean for you?
Pigs get fat. Hogs get slaughtered.
I will say it again. It really is sad that provider’s who care for UHC patient’s at a financial loss ( due to UHC reimbursement rates) are subsidizing excessive compensation of hospital and Insurance company executives. Some of us accept all patient’s regardless of the patient’s ability to pay, insurance coverage or the insurance company. It is wrong that a CEO of a health plan can have a financial gain of $1.5 billion. This money comes directly out of the system. A better use would be to provide preventive health care, universal health care coverage and research. It is just not right. I don’t think he should go to jail. We need a change in health policy to correct these types of problems. I also wonder what kind of Board of Directors UHC has???
While I agree that the number of stock options that Dr. Maguire was awarded was excessive and the backdating was improper, the fact remains that he is widely credited with visionary leadership which created enormous value for shareholders during his tenure. The company is generally considered to have the best information systems and the deepest management bench in the industry.
As an investor, I have no problem with someone who creates this much value getting rich himself as compared to, say, former Disney CEO Michael Eiser who both destroyed value during his last 10 years and drove many good people away yet he, himself never had a bad year.
While United, Wellpoint and other insurers have some work to do in how they treat both providers and policyholders, I think the bashing from the media has gone overboard. With Medical Cost Ratios of 80% or more for most of these companies, their profitability as measured by return on equity or return on capital is not out of line with corporations generally. Maybe they need to pay providers more, but that would mean still higher premiums for customers. There is no free lunch.