In a previous post, we showed that health insurance companies are spending thousands of dollars of their customers’ premiums, not on medical care, but on lobbyists. But the insurers don’t stop there. According to industry whistle blower Wendell Potter, insurance companies are also spending premium dollars on repurchasing stock:
If you’ve been paying attention to what health insurance company CEOs have been saying to Wall Street over the past several months, you will know that they are spending more and more of their firms’ cash — which comes from you, of course — to “repurchase” their firms’ stock. And Wall Street absolutely loves that.
I once handled financial communications for CIGNA. So I knew that whenever the company could tell its shareholders that the amount of money it earned on a per share basis during the preceding three months was more than expected, those shareholders and other investors would likely show their appreciation by offering to buy even more shares of the company’s stock. When more investors are buying stock in your company than are selling it, the stock price will go up. And when that happens, everybody who owns stock or can cash in a bunch of stock options — including you, if you are a senior manager or a health plan medical director — will suddenly be richer.
Being very familiar with how and why this happens, your company’s top executives will do whatever they can make sure the earnings per share (EPS) exceeds Wall Street’s expectations. One of the ways they do this is by joining the investors in buying shares of the company’s stock.