A Crime not a Crisis: Why Philadelphia Health Insurance Costs So Much. Six Ways to Fix It.

A Crime not a Crisis:
Why Philadelphia Health Insurance Costs So Much.
Six Ways to Fix It.

by Paul Glover

Philadelphia’s favorite revolutionaries, Ben Franklin and Tom Paine, would likely rebel against this city’s public health crisis. They were businessmen who considered it un-American to profit from the misery of Americans.

Rocky might jump into the fight, too, knowing that more than 1.4 million Pennsylvanians and 135,000 Philadelphians are forced to live without health coverage. It might strike them especially unjust that 70% of these folks are employed, mostly in services: baristas, bike messengers, cashiers, contractors, even many nurses. They’re not eligible for government health assistance, and 70% say they can’t afford corporate plans. Every day they risk their small homes and savings, hoping to avoid accidents and illnesses. More of us share this fear every day.

Increasingly, even the middle class worries. Their children are outgrowing family plans, and they’re paying ever-higher taxes for indigent care. Only 5.4 million of 12 million Pennsylvanians carry commercial insurance: down from 7.1 million in 2001. During 2005, medical costs for uninsured Pennsylvanians raised private employer coverage an additional $277 per covered employee and $681 for employees with families.

During the past 15 years, Pennsylvania’s uninsured rate has increased 55%. The Center for Studying Health System Change reports that the uninsured are less than half as likely to see a doctor. Over 18,000 Americans, including 600+ Pennsylvanians, die yearly for lack of health insurance. U.S. medical financiers have killed far more Americans than have terrorists.


Today Pennsylvania health insurance premiums rise faster than the U.S. average, according to Steve Foreman, professor of Health Policy Research. Dr. Mark Piasio, President of the Pennsylvania Medical Society, testified recently that Pennsylvania health insurers raised premiums 40% per enrollee, between 2000 and 2004, from $2,161 to $3,022, an increase nearly double the U.S. average. At the same time, “insurer surplus reserves rose from $5 billion to $6.8 billion. Total annual profits of Pennsylvania health insurers increased from $468 million in 2000 to $621 million in 2004. This translates to an annual per enrollee profit for Pennsylvania health insurers in 2004 of $93.45. The equivalent profit for health insurers in the rest of the country that year was $79.79.” Medical News Today, 9/7/06

“There are really only two significant health insurers left serving [Philadelphia’s] five county region - Independence Blue Cross and Aetna. Ten years ago there were about ten,” says professor Foreman. In western Pennsylvania, Highmark, one of the nation’s largest health insurers, received 2005 approval for a 9.9% average premium increase, then sought a 6.6% boost for individuals, more than twice the rate of inflation.

Insurers squeeze policyholders because they’re investor-driven and therefore, notwithstanding mandated community programs, they have no primary interest in health. As outstanding proof, consider their stockholdings in cigarettes, which kill 440,000 Americans (23,000 Pennsylvanians) yearly. They love Philip Morris (Altria)-- UnitedHealth: $5.6 billion invested. Aetna: $3 billion. MetLife: $2.2 billion. Cigna: $1.6 billion. "A health insurer that buys tobacco stocks cares more about profits than the health of its patients," said Dr. Wesley Boyd. --Journal of the American Medical Association. March 2000

They squeeze doctors, too. Aetna was ordered by a federal district court in 2003 to pay $470 million to 700,000 doctors for cheating them and interfering with recommended treatments."


The State of Pennsylvania began in 1945 to regulate health insurance. The people we elect and the people they hire, paid for by us to serve us, should be ensuring that all Pennsylvanians get the best health care.

So why are health insurance prices allowed to rise faster here than other states and faster than inflation? Why are legitimate claims denied? Why are there fewer genuinely nonprofit insurance providers, and why are there fewer insurance choices?

The Pennsylvania Insurance Department permits for-profit insurers to take over non-profit insurers, which reduces competition and affordability. Pennsylvania’s top four insurers now control 65% of policies. The Blues control 76% of the statewide health insurance market, and they write about 85% of the non-Medicare business in western PA. “This is a monopoly,” says Dr. Robert Sklaroff, former President of the Pennsylvania Society of Internal Medicine. Blue Cross and Blue Shield provide healthcare coverage for about 25% of Americans, or 68.7 million people, in 50 states. It is the 19th largest employer in the United States. The merger between the state’s two largest health insurers, Independence Blue Cross and Highmark (itself formed 1996 by consolidation of PA Blue Shield and Blue Cross of Western PA), creates virtual monopoly, which is permitted in the insurance industry.

According to Herb Denenberg, former Pennsylvania Insurance Commissioner (1971-74), “Don't think the insurance commissioner regulates the insurance industry. It's the other way around. The typical insurance commissioner over the years has been somewhere between a lapdog and puppet of the industry. That means consumers often pay too much for insurance, get the wrong kind of protection, don't get their claims paid property, and are otherwise ripped off by an industry that pretty much operates without the restraints that a commissioner is supposed to apply.” badfaithinsurance.org

Lawrence Otter, former Senior Deputy Pennsylvania Attorney General, testified to the PA House Health and Human Services Committee that “ The insurance companies... have abused their public trust and the statutory and contractual rights of every policy holder in Pennsylvania. I recommended to the Attorney General that there was sufficient evidence against various health insurance companies to bring a legal action. The Pennsylvania Insurance Department [had] failed to execute the law. I quickly discovered that there was no political will to do what is right and just for the citizens of the Pennsylvania. The Attorney General was reluctant to go after his campaign contributors and their minions.”

As a former Independence Blue Cross board member and retired physician told me, “I quit Blue Cross when the mafia took over.”

There are many such voices: "All the Blues have made grossly insufficient charitable health insurance-related contributions [considering] their high premium income and revenues; this is in part because the Insurance Department has largely failed to define and enforce the Plans' legal charitable obligations,” said Jonathan Stein, lawyer for a coalition of fourteen consumer, health care, labor, senior citizen groups, plus the City of Philadelphia

State bureaucrats who fail to challenge HMO/PPO profit are well rewarded. A few examples: New York State’s Commissioner of Insurance, Gregory Serio, resigned in 2005 to become a lobbyist for insurers. Kentucky’s Commissioner, George Nichols, resigned to become a top executive for New York Life Insurance Company. California’s Commissioner, Chuck Quackenbush, resigned after having allowed insurers to systematically cheat clients. California’s deputy director of the Department of Managed Health Care owned UnitedHealth Group stock while approving its $9.2 billion acquisition of PacifiCare Health Systems. He’s gone also, but many such remain.

Here in Pennsylvania, former Insurance Commissioner Linda Kaiser (1995-97) had been a lawyer for the Reliance Insurance Company of Philadelphia, and for Cigna. When she left the Pennsylvania Insurance Department (PID), she resumed work for Reliance (soon fined $85 million and closed). She now “counsels insurance companies... on complex insurance regulatory issues and transactional matters (such as) compliance, enforcement, corporate, business, contractual and licensing...” On Kaiser’s departure, Herb Denenberg said “You can be sure the main say in who becomes [the next] insurance commissioner will be the lobbyists, executives and spokesmen of the insurance industry.”

Indeed, her successor, Diane Koken, was former VP of Provident Mutual. She allowed Blue Cross to retain $6 billion surplus in 2005, rather than release it to the state’s Medicaid plan as intended. “Blues in other states have many more subscribers and much more in claims payments yet do not carry nearly as much in excess surplus,” said Assembly Representative Phyllis Mundy (D-120). Lance Haver, Philadelphia’s Director of Consumer Affairs, added, “We do not believe that the Blues have proved that they need a surplus above the legally mandated 200%. We have therefore asked the Insurance Commissioner to order a reduction which will lower rates for everyone.” That did not happen.

During Koken’s tenure, overhead and profit percentages of Pennsylvania health insurers have increased despite the fact that much of the revenue increase was pure premium increase, rather than greater enrollment. Annual health insurer administrative costs per member more than doubled from $132 in 2000 to $270 in 2004. (Medical News Today 9/7/06) Perhaps gentle regulation is necessary, to secure Cigna CEO Edward Hanway $11,222,552 and Aetna CEO Ronald Williams $4,897,972.

Six years ago the federal government had to investigate PID’s dangerous regulatory neglect. Writing to Koken (6/21/00) they demanded, “In light of the very serious difficulties facing [Reliance Insurance Company], we are interested in learning what you are doing to protect [their] policyholders... We also want to hear your explanation of how Reliance was allowed to engage in the risky practices that now put its policyholders in jeopardy, and as well, what you are doing to prevent insurers from taking these risks in the future” --Rep John Dingell, U.S. House Committee on Energy and Commerce. The Reliance case was settled five years later.

While most of PID’s 360 employees are doubtless honest public servants, the revolving door with insurers opens to every floor of the Department. Chief counsel Steven B. Davis (2003-2006) left to co-chair law firm Stradley Ronon's "nationally recognized insurance practice group." "Already, the response in the industry has been fantastic." David F. Simon, His successor, left PID in 2006 to become Senior VP and chief counsel of Jefferson Health System. Such transfers can dilute regulatory rigor.

Pennsylvania House Representative Kathy Manderino (D-Phila) testified: "The Insurance Department is supposed to protect the interest of consumers. But when they testify in hearings, it sounds as though the Insurance Federation of Pennsylvania [the chief lobbying organization of the industry] wrote their speeches." (Philadelphia Inquirer 2/26/99)

Herb Denenberg (cited by Ralph Nader as “the most consumer-oriented insurance commissioner in American history”) says, "A revolving door system [in the office of commissioner of insurance] is a built-in conflict of interest: a built-in bias against protecting policyholders, and a built-in regulatory abuse. The [insurance] industry and its trade press see revolving-door, pro-industry regulation as just part of the system... The deck is stacked against the consumer, and abuses are inevitable because no one is policing the insurance industry.”

Pennsylvania judge Mary Hannah Leavitt, ordering the liquidation of insurance company Legion Group, wrote "The failure of the reinsurers to honor their contractual obligations is not limited to Legion Group; it is endemic to the industry."


Pennsylvania’s legislators have legislated for themselves the best socialized medicine, paid for by many uninsured taxpayers. They could have created solutions for the rest of us long ago, but the insurance industry has been tough, buying legislators left and right. Denenberg says, "Money dictates policy. Campaign contributions gain access and input into the decision making process and also legislative and executive outcomes. The consumer is left out in the cold... Translated, that means the insurance industry (and other industries) do pretty much what they want to do.”

Former Assemblyman Thomas P. Gannon (R-Delaware) said that the insurance lobby "is used to getting its way. At times, they use raw knuckles. They'll tell you: 'We've got the power; we're going to do it.' And they do." (PI 2/26/99)

Of 245 Pennsylvania Assemblymen disclosing their interests in 2002, over 21% sat on a legislative committee with authority over a professional or business interest. (Center for Public Integrity) In the Senate, five of the 14 (38%) senators on the insurance committee had personal business ties to the industry in 2000. Some were insurance agents, some own insurance companies, and some were lawyers for insurance companies. This violates the Ethics Act (65 Pa.C.S. §1102), a crime.

Denenberg again: “It is apparent... that our state legislators have been doing absolutely nothing or... very little for the consumer, but hiding their heads in the sand, acting as if they didn't know that these illegal practices and harsh ruthless insurer actions were/are pervasive. It’s the insurance companies’... money and power [that] can buy influence and regulation [within] the system.” Ibid.

Certainly the many legislators and regulators who serve this system are good parents, friends and neighbors. However, their business damages Pennsylvania’s economy and communities. They share our need for a new health system, and new jobs.


Though Pennsylvania corruption is an old story, revulsion at this lawlessness has spread among the Middle Class, to employers, doctors, and local government. Most liberal campaigners, themselves mostly insured, demand universal coverage, nothing less and nothing else. They petition the government for relief. Yet for the past hundred years U.S. presidents (TR, FDR, HST, BC) have tried and failed to deliver a comprehensive health plan.

Nationally, millions of citizens and dozens of states have advocated universal health coverage. They believe it urgent that our federal government provide “Medicare for All.”

Only two of Pennsylvania’s congressmen (Doyle and Fattah) have endorsed the National Health Insurance Act (HR 676), even though a 2004 Harvard Medical School study found that health care bureaucracy cost the United States $399.4 billion in 2003, that national health insurance could save at least $286 billion annually on paperwork, enough to cover all of the uninsured and to provide full prescription drug coverage for everyone. The authors found that corporate insurance bureaucracy inhales 31 percent of total U.S. health spending, while Medicare’s overhead is just 4%. As well, insurers managing MediCare are chronically caught ripping off the public by double-billing for administrative costs. pp 12-13

Though the outcry gets louder, insurers are not scared. “With [the] Democratic takeover of the U.S. House of Representatives and Senate.., what might the impact be on healthcare providers? Not much, at least in the short term, it seems. True, the Democrats have vowed to address the Medicare Part D $2,850 ‘donut hole’ issue and invest in medical research, including stem cell research. The party also offers a none-too-specific pledge to provide Americans with access to affordable health care. But no one seems to think the proposals have any teeth,” wrote Fierce HealthCare (“Daily News for Healthcare Executives”) 11/8/06.

State-level universal coverage has been proposed in 18 states and seen partial success in three. Pennsylvania’s Senate Bill 300-- the “Balanced and Comprehensive Healthcare Reform Act”proposes full coverage for everybody: no deductibles or co-pays, no caps . This plan would cover all costs of hospitalization, physicians, prescriptions, dental, mental, optical, emergency transport, addiction, transplants, medical equipment, hospice, long term care, etc, regardless of preexisting conditions. It permits patient choice of doctor and preserves the private health care system. It replaces all private insurance and most public programs.

Act 300 would be funded by a 10% payroll tax plus a 3% Wellness Tax on personal income. Freed from insurance premiums, most employees would profit. The plan further provides no-fault payments to anyone injured by medical care; it covers physicians for malpractice free, up to $6 million. As well, it fully funds health education and physical fitness curricula. It identifies and eliminates environmental health hazards. There’s even funding to workers displaced by the transition to single payer system. “This legislation will also create tens of thousands of excellent new jobs in health care, education, substance abuse treatment, and long term care.”

State legislators have been slow to get aboard. Only 3 of 50 Senators and 20 of 203 House Representatives cosponsored in 2006. “The forces aligned against us are formidable,” says Dr. Walter Tsou, former Philadelphia Health Commissioner.  “Our goal is to pass a bill by November 2007, and that depends on our ability to create a grassroots effort and raise enough money to fight the inevitable push back by the insurers.” 

The push back has already begun. Highmark Blue Shield Director of Regulatory Affairs, Candy Gallaher, testified in Pittsburgh that "...the soundest approach toward achieving universal coverage is by building on the state's system of public and private financing of health insurance." Independence Blue Cross declares that “no program to expand health insurance coverage will succeed unless we address the root cause of the growing number of uninsured-- rising health care costs and utilization. We expect this issue to be #1 on the legislative agenda in January, 2007 and we intend to participate in a meaningful way.”

Walter Tsou: “The problems with the current system are increasing and politicians will be under pressure to look for other answers.  State solutions are not as ideal as national solutions and we may have to wait until 2008 before national health insurance is taken seriously, depending on the President's position.  In the meantime, a state single-payer bill at the minimum offers an organizing tool and hopefully places Pennsylvania in the national leadership for health care reform.”


Blame for the health insurance failure, however, spreads widely. Insurer greed is itself spurred by the greed of their investors, who crave profit more than healing. Aetna’s prime stockholders are Microsoft, GE, Pfizer, Citigroup, Oracle and Time Warner.

There’s also the greed of pharmaceutical companies, whose profit tripled in 2004. U.S. Senator Bernie Sanders (I-Vt.) says this sector has the most powerful lobby in Washington: 4.5 pharmaceutical lobbyists per congressmember, including at least 48 former members of the U.S. House of Representatives and 15 ex-senators. "Uniquely in the industrialized world, our government does not regulate the pharmaceutical industry—rather the pharmaceutical industry regulates the government, which is why Americans pay by far the highest prices in the world for medicines they need," said Sanders.

Big Pharma is assisted by doctors who find it easier to prescribe pills (winning vacations for doing so) than to listen humbly to humans. Many patients find it easier to eat pills than to eat vegetables, and exercise-- Americans consume 34% of the world’s pharmaceuticals.

State-mandated insurance coverage of over 1,000 special interest categories increases premiums 25-40%. Mandates now total 1,843 across the states. As mandates increase prices, the uninsured rate also rises. Sixteen states with 40 or more mandates maintain an uninsured rate of 15.4%. In 19 states with 30-39 mandates, the average uninsured rate is 14.8% Health Insurance Mandates in the States, 2006 These mandates apply only to Pennsylvania's smallest employers.

Pennsylvania’s three Blue Cross plans “seem to hold physician fees lower than in more competitive parts of the country, downcoding and delaying claims payments (and) unilaterally levying physician contract terms...” says Health policy analyst Christopher Guadagnino. Businesses, too, are less able to find plans that retain employees.

Medical malpractice insurers do their part too. They charge more when tort lawyers win huge lawsuits. An estimated 4,200 Pennsylvanians die yearly from medical errors. Jay Angoff, former State of Missouri Insurance Commissioner said, “The leading malpractice insurers’ Annual Statements indicate that they have been raising their premiums even though both their actual claims payments and their projected future claims payments have been falling. Taken together, the malpractice carriers analyzed increased their net premiums by 120.2% during the period 2000-2004, although their net claims payments rose by only 5.7%. Doctors have been overcharged during the last several years.” Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry

Malpractice coverage requires physician fees to rise again. Since 2002, about 1,000 doctors yearly have left Pennsylvania and only 7.8% of new physicians stay in Pennsylvania after residency. Fear of legal action has led to overreliance on costly high-tech diagnostic equipment. Malpractice victims are often shocked that doctors, pills and machines are fallible.

Finally, sending high-paying American jobs overseas, for cheaper labor abroad, has weakened the capability of workers to demand benefits. Philadelphia suffered the loss of 51,700 manufacturing jobs between 1998 and 2005, or nearly 25 percent of our total. (Bureau of Labor Statistics)

We have created, in sum, a vastly unhealthy economy. Pennsylvanians have among the nation’s higher rates of cancer, heart attack, obesity and smoking, with Philly rates far higher. So many Pennsylvania jobs depend on patching illness (14% of non-governmental) that our economy would fall apart if Pennsylvanians ate healthy food and kept fit, then trusted their bodies more than pills. Medical care generates 12% of the state’s gross domestic product, so change is resisted.


Deliberately inflicting injury is criminal. When someone kills, punches or robs people, or neglects children, they may be jailed. Yet it is lethal though legal that health insurance costs more than 47 million Americans can afford, that Americans die early for lack of full coverage, that more than 100,000 Americans die yearly from pharmaceuticals properly prescribed and ingested, that 18,000 Americans die yearly for lack of any coverage. It is lethal though legal that families are shredded by medical bankruptcy, that millions of children do not get preventive care.

And it is lethal though legal that insurers are permitted by government to fatten. The only people who can systematically cause death or injury without penalty are legislators, regulators and judges. That’s because they make the laws and regulations, then enforce them to protect profit.

Some Philadelphians, who can’t wait another 3, 5, 10 or 100 years for honest government, started a nonprofit co-op health plan called PhilaHealthia. It’s based on the successful health co-op in Ithaca, New York. There, members of the Ithaca Health Alliance pay just $100/YEAR to be protected (with any healer worldwide) for specified common emergencies, and to receive preventive care at their local free clinic. Members vote for their board of directors and serve on committees. Their proven honest service since 1997 (all payments and denials of payments are listed on website, payments are usually made overnight, there’s a maximum wage for staff) is approved by Ithaca’s Chamber of Commerce, Health Department, Cayuga Medical Center, and local legislators.

Co-op health plans have long history in this country. Between 1890 and 1930 most health insurance was provided by hundreds of nonprofit fraternal organizations like Moose, Knights of Pythias, Eagles, Odd Fellows-- the funny-handshake people. They hired doctors, built hospitals (like Shriners), senior housing and orphanages. They paid survivor benefits. Professor David Beito estimates that in 1920 more than one-third of American males were members of fraternal self-help organizations. Medical benefits were provided for “a small, fixed [premium] equal to part of the wages of a worker with average wages.”

PhilaHealthia’s vision transcends paying ever-larger medical costs. While they advocate universal health coverage they also seek community ownership of health services, with a healthy health system replacing the medical technology sickness system.

This co-op sector, known also as the Health Democracy movement, intends to rebuild the health system so that, when universal coverage is finally enacted, federal funds go to nonprofit medical centers, clinics and staff. They believe that the nonprofit clinics and medical centers of the “United States Health Alliance” could defend the federal plan against inevitable attacks, much as organic food standards are defended by grassroots campaigns.

Health Democracy intends, moreover, that health care become truly healthy-- that holistic healing modalities be welcomed alongside allopathic, that preventive care be emphasized. Their clinics will prefer warm hands to cold machines, but welcome both. And, since most breast cancers result from environmental contamination, they are an environmental movement as well, addressing the public foundations of personal health-- clean air, clean water, clean food, and alternatives to war.


Fraternal insurance faded when corporate lobbyists pushed laws that shoved them aside, until such plans became illegal. Texas specifies, for example, that “a local mutual aid association may not provide benefits for accidental injury or sickness.”(sect; 886.104)

Most states now require that, to get into the insurance poker game, you’ve got to put millions of dollars on the table. (PA. $1,500,000). And you’ve got to cover those mandates, especially Big Pharma. The Ithaca Health Alliance broke these chains, using political pressure to set a precedent within New York state.

One year ago, as soon as PhilaHealthia began, PID ordered it shut. Growing incrementally and honestly is not yet permitted here. “If Philadelphia wants to attract artists and reduce crime, it needs to make life easier for low-income people,” said Elizabeth Pearson, PhilaHealthia board member and Poet-in-Residence at Chestnut Hill College.

PhilaHealthia tried negotiating with PID. They documented their success in Ithaca. They invited PID to formally adopt Ithaca’s strict regulations for enforcing integrity. Blue Cross itself was originally established with such legislation, enabling them to "enjoy the advantages of exemption from the regular insurance laws of the state, freed from the obligation of maintaining the high reserves required of commercial insurance companies and relieved of paying taxes" (Anderson 1944, p. 11) Enrollment in the nonprofit Blues was surpassed by commercial insurers in 1951.

Relief may not come soon from legislatures or regulators. Independent action by those ready to act seems necessary.

Therefore, to proceed, PhilaHealthia’s board of directors decided last May to override existing law. When 1,000 Pennsylvanians have pledged to join, PhilaHealthia's minor medical plan will begin.

Civil disobedience asserts the right of Americans to help one another. As Martin Luther King Jr. wrote, “There is nothing wrong with a traffic law which says you have to stop for a red light. But when a fire is raging, the fire truck goes right through that red light... Or, when a person is bleeding to death, the ambulance goes through those red lights at top speed... Disinherited people all over the world are bleeding to death from deep social and economic wounds. They need brigades of ambulance drivers who will have to ignore the red lights of the present system until the emergency is solved.”

Dr. King's declaration applies to health care as a civil right. Today, as 230 years ago in Philadelphia, when public servants serve private interests instead, the public declares independence and takes control.


END CONFLICTS-OF-INTEREST: Those who have been employed by an insurance company or its lobbying firm should not be employed by PID, and PID employees should be enjoined from working or lobbying for an insurance company for ten years. Insurance companies should be prohibited from owning tobacco stocks. pennpirg.org

UNIVERSAL COVERAGE: Pass state law SB300 or federal law HR 676. These will eliminate for-profit middlemen. phillyhealth.blogspot.com

JOIN PHILAHEALTHIA: Co-op plans will create democratically-managed systems that provide medical services at least public cost. PID should adopt regulations for the co-op sector, permitting genuinely nonprofit grassroots initiatives. Ask your state legislator to sponsor the regulations noted above.

HEAL MEDICINE: Since malpractice judgments are against a few doctors, make high-risk doctors buy insurance separately from good doctors, thus lowering malpractice premiums, doctor bills and insurance premiums. Join the campaign to prevent dangerous pharmaceuticals. Put love at the center of medicine.

SHAPE UP: Health costs rise for all when any of us is ill, whether insurance is public or private. Therefore, for example, since High Fructose Corn Syrup in sodas causes so much obesity and diabetes, schools should remove soda machines.

TAKE THE POWER WE OWN: Pension funds should remove investments from health insurance companies. Half of the money in the U.S. stock exchange is owned by unions. Unions and individuals should invest in companies with fair trade records, and start mutual aid plans.

This article and related matter are available for $3.00 as a booklet from: Paul Glover, 514 Wellesley Rd, Philadelphia, PA 19119

Glover is author of Health Democracy. Your comments are welcome. [email protected]