Private Health Insurance CEOs and Their Disproportionate Salary

In the United States, there are over fifty million people without health insurance coverage, and the number has grown substantially in recent years. Yet despite this alarming trend, the massive private insurance industry is booming. Without a competitive publicly financed option, many people are entirely dependent on their employers for health insurance. This means that in many areas of the US, private insurance companies face little or no competition. Consolidations have resulted in a few large health insurance companies having influence not only over the baseline price of many health premiums and healthcare services, but also a patient’s course of treatment. Many municipalities represent a captive market, given that large health insurance companies may be the dominant provider for a large region.

These business practices have resulted in extreme profits for health insurance companies, and revenue is at an all-time high, even after the passage of the Affordable Care Act in 2010. Also known as Obamacare or the ACA, the Affordable Care Act was, in theory, designed to curb overall healthcare spending while extending coverage to tens of millions of Americans who previously were uninsured. Though the Affordable Care Act has succeeded in establishing the Small Business Health Options Program (SHOP), which allows small business owners to compare pricing plans for insuring their employees, the ACA does not effectively curb health insurance company profits. In 2010, the year the ACA passed into law, private insurance companies generated higher profit margins than they ever had before.

These high profits have transferred into grossly inflated wages for the top administrators at many private health insurance companies, with a current (as of 2010) median CEO healthcare administrator salary of around $10 million. While these may dwarf the US median family income, they are still a very small part of overall US healthcare spending. More importantly, these costs are expected to rise significantly as the swell of US baby boomers reaches retirement age. More healthcare services tend to be consumed by the elderly, who are often seeking expensive treatments (e.g. hip or knee replacements) to improve their quality of life. US CEO health administrator pay, while it is a small part of overall healthcare costs, reflects a larger problem in US healthcare: the price creep of every part of the healthcare delivery process, which vastly outpaces the rate of inflation. If true financial reform is to come to the healthcare industry, CEOs need to make the same sort of cuts to their salaries (either voluntarily or through legislation) that employers providing health insurance to their employees are endeavoring to make.

Post Author: Violet

Violet Rae Murphy: Violet, a biotech analyst, covers advances in health technology, biotech innovations, and the future of personalized medicine.