ObamaCare is not exactly my cup of tea, but, as I have noted in the past (see here, here, and here), the Wall Street Journal editorialists seem willing to make just about any argument, no matter how unreasonable or outright inaccurate, to defeat it. The latest example comes in today's Journal editorial attempting to defend WellPoint for its 39% rate increases on California Anthem Blue Cross customers. (FutureOfCapitalism.com reported and weighed in on the controversy back on February 10.) Here's the first laugher: "Anthem last year hired an independent actuarial firm that found its rates sound and necessary." Hmm, if the firm was hired by Anthem, do you really think it was independent? How much was this firm paid for this job, and would it have been re-hired had it found the rate increases to be unsound and unnecessary? The Wall Street Journal editoralized about MIT economist Jonathan Gruber's self-interest in relation to his consulting contracts with the federal government; what about the financial interest of this "independent" actuarial firm? The real puzzler, though, is the Journal's claim today that, "Anthem's profit margins are in line with its two largest nonprofit competitors in the state; its net income on a per-member-per-month basis in 2008 was $12.62, compared to Blue Shield's $13.22 and Kaiser's $18.45." Since non-profits, by definition, don't have "profit margins," it's hard to know what the Journal is talking about. But Blue Shield of California's Web site says it had "operating income" of $307 million in 2008, and 3.368 million members. Do the math and that's net income per member per month of $7.60, not the $13.22 the Journal cites. Kaiser's Web site says it had 2008 net income of $794 million, and 8.6 million members. That's net income per member per month of $7.69, not the $18.45 cited by the Journal. The Journal doesn't say where its numbers come from. Let's hope it wasn't that "independent" actuarial firm hired by Anthem. I've emailed the 20th-most-influential conservative journalist in the country to ask him for a response and will update if I hear back from him.
[Update: I did hear back, and they don't comment publicly on editorials. But it looks like the Journal's language in the editorial closely tracks that of a WellPoint executive, Brian Sassi, who in a letter to the secretary of Health and Human Services, wrote, "Anthem's profit margin in California is in-line with and below that of many of our competitors, including our two large not-for-profit competitors. For example, Anthem's net income on a per-member-per-month basis was $12.62 during 2008, which compares to $18.45 and $13.22 for our two large not-for-profit competitors." A footnote says "Source: DMHC Financial Filings. All PMPM's have been adjusted to exclude the impact from other-than-temporary impairments of investment securities." The "DMHC" is California's "Department of Managed Health Care." One wonders whether that adjustment "to exclude the impact from other-than-temporary impairments of investment securities" makes Anthem's profits look bigger or smaller relative to its competitors.]
FutureOfCapitalism.com has nothing against insurance companies or any other businesses making profits; we're capitalists here and we love profits. But insurance company profits are like insurance executive compensation; it's one thing if they come on a free-market basis, it's another thing if they come in a market in which the power of the government is used to force consumers to purchase insurance and to take money from some taxpayers to subsidize the insurance purchases of others.