Health Insurers Own Tobacco Stocks Worth Nearly $4.5 Billion

Major health insurance companies own nearly $4.5 billion worth of stock in tobacco companies, according to a Harvard University study. It kinda makes sense: health insurers know tobacco sickens people, and so as long as people are smoking, why not profit from the killer? It’s what David Himmelstein, a co-author of the study, calls “the combined taxidermist and veterinarian approach: either way you get your dog back.”

The largest tobacco investor on the list, the 160-year old Prudential company with branches in the US and the UK, has more than $1.5 billion invested in tobacco stocks. The runner-up was Toronto-based Sun Life Financial, which apparently holds over $1 billion in Philip Morris (Altria) and other tobacco stocks. In total, seven companies that sell life, health, disability, or long-term care insurance, have major holdings in tobacco stock.

Why is it a big deal? “If you own a billion dollars [of tobacco stock], then you don’t want to see it go down,” says Himmelstein, “You are less likely to join anti-tobacco coalitions, endorse anti-tobacco legislation, basically, anything most health companies would want to participate in.”

Sun Life Financial denies that they hold any tobacco stock, a claim Himmelstein delicately called a lie.

It’s just another thing to keep in mind this summer as Congress debates whether we can continue trusting our private health insurers to look out for our best interests.

Health insurers want you to keep smoking, Harvard doctors say [Scientific American]
(Photo: Kevin Dean)

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  1. u1itn0w2day says:

    This is nothing more but another conformation of how big a BUSINESS the health care industry is. Just business…

    This also more proof that too much time is being spent on WHO is paying for healtcare rather than controlling HOW much/controlling the costs that the health care industry sticks YOU with.

    And surprisingly health care stocks pay just about as much in dividends as alot of other non-tobaco companies. The kicker here is that the tobacco industry is doing a ton of business overseas so these insurance companies are investing in something where the $$$ probably won’t make it back to the US economy.

    • TechnoDestructo says:

      @u1itn0w2day:

      Go with a non-profit model and shit like this would probably still happen.

      Hell, it might even happen with a government run system if the trust fund(s) were allowed to be invested in stocks.

  2. GTI2.0 says:

    I call bunk on this. Tobacco-related illnesses and deaths are among the highest cost items a health insurance company could have to pay out for. Does the author honestly think that $4.5B of investments have paid out better than the gamble that they’re not going to have tobacco related illnesses and diseases to pay out for?

    Tobacco related healthcare has cost $14B/year according to this study (“The Economics of Tobacco Use”),:

    [www-nehc.med.navy.mil]

    Most of this is paid by insurance companies.

    • semiquaver says:

      @GTI2.0: You’d think so, but this is not the case. Insuring smokers is profitable. If it weren’t they’d refuse coverage. Smokers cost more in benefits, but their premiums are significantly higher. Their actuaries have priced in the extra risk, so those $4.5B of costs are coming out of society’s pocket. If anything, insuring higher risk activity is good for the insurance industry.

      • Shoelace says:

        @semiquaver: And those extra costs are not just coming out of smoker’s pockets – they’re coming out of the pockets of any non-smokers who are part of a group plan.

        I’ll bet the pharmaceutical companies are likewise invested in killer industries. They claim to use our money for R&D for cures, yet if they find a cure for something like lung cancer they’ll lose a fortune in selling their maintenance drugs.

        Solution (I’ve said this before): Deny health coverage to smokers, who each have to register in order to buy tobacco products. Let big tobacco provide them with health plans if they choose to. That’ll be a real incentive to not start smoking or to quit and more of the financial risk will be put where it belongs.

        • Blake Kelly says:

          @Shoelace: And Fat people, being fat is even worse than smoking. People who speed too. Drinkers. People who tan. People too lazy to exercise. People who eat unhealthy food. YOU!

          • Shoelace says:

            @Blake Kelly: If my brains fall out and I decide to start smoking, then yes.

          • b01000100 says:

            @Blake Kelly: Did you just call Shoelace a fat, tan, drunk person who likes to drive fast? ohhh, sick burn!!!! You totally fucking pwned Shoelace. Quick, get in the teabag before s/he respawns! Also, while you are teabagging Shoelace, yell into your mic that s/he is gay and they should stop playing the Internet.

            That will get your point across.

            p.s. You smell like goat ass.

  3. Parsnip says:

    This is sadly unsurprising. How unfortunate is it that we live in a society where one doesn’t really bat an eye at the revelation that the companies entrusted with our health care don’t actually care about our health?

  4. gemetzel says:

    As long as it’s for profit our interests won’t be what their looking out for. Universal Health Care for the win.

    • MooseOfReason says:

      @gemetzel: The interest there will be getting re-elected. Don’t act like it’s a silver bullet.

    • jswilson64 says:

      @gemetzel: Or not for profit healthcare. See BlueCross BlueShield of Texas, Illinois, New Mexico, and/or Oklahoma (among others) for insurers who don’t answer to shareholders.

  5. IT-Chick says:

    Not surprised, I’ve been talking about this for years, it pisses me off.
    Health insurance will not cover ANYTHING related to quitting smoking, but will cover rehab for other addictions.
    Atleast smoking cessation products are covered by Flex Spending benefits, so it’s better than nothing.

    • Parsnip says:

      @IT-Chick:

      My health insurance covers Chantix, but not cessation aids that contain nicotine.

      They also offer a program of some sort for support.

    • hapless says:

      @IT-Chick: Insurers don’t cover smoking cessation products because they’re not proven to work.

      Insurers also won’t cover your homeopathic snake oil, acupuncture, or faith healing.

  6. HIV 2 Elway says:

    Uh, big deal. Insurance companies are looking so sustain their wealth. No need to put money into high risk investments, enter blue chip stocks like tobacco companies.

    • youbastid says:

      @HIV 2 Elway: You don’t see the irony in the fact that they’ll charge higher rates and/or cancel people’s insurance and/or refuse to pay out benefits because their customers engage in unhealthy practices, yet they invest (HEAVILY) in the very machine that spends billions a year in attempts to push those very practices on them?

      • HIV 2 Elway says:

        @youbastid: I expect if you look at any huge companies portfolio you can find apparent conflicts of interest. I wouldn’t be surprised if these companies were invested in other blue chip companies that can be perceived as unhealthy (Coke, fast food joints). It all still boils down to preserving wealth versus aggressive growth.

  7. I Love New Jersey says:

    Like Congress is going to do a better job. Now how many of the fools on the hill have tobacco stock?

    • rpm773 says:

      @I Love New Jersey: Or state pension funds, for that matter.

    • savdavid says:

      Like Congress is doing a better job? What do you mean? Since when Obama took over or under Bush when they approved two wars, spying on American citizens, trillions of dollars for war and no-bid contracts that Cheney’s Halliburton profited from, cut veteran benefits, watch New Orleans drown, cut back funding on consumer protection, bailed out Wall Street? Really, I Love New Jersey, you should be more clear and informed.

      • WiiPoleNotIncluded_GitEmSteveDave says:

        @savdavid: I’ll repeat what I wrote below:

        Don’t forget that Obama has agreed with and expanded on Bush’s unwarrented wire taps, has pardoned CIA people for any torture they may have committed, floated ideas of cutting ALL veteran benefits and making them supply their own health care, written executive orders okaying massive bonuses for bank CEO’s under the bailout, etc…

  8. DorianFlaccus says:

    It explains why insurance wont pay for the $200 quit smoking drugs.

  9. rpm773 says:

    It kinda makes sense: health insurers know tobacco sickens people, and so as long as people are smoking, why not profit from the killer?

    That’s one way to look at it.

    I’d say insurance companies were hedging themselves against scenarios where the cost of treatment for a smoker is greater than the aggregate of his premiums paid. Does that negative offset equal the ROI? Who knows?

    But in reality, I suspect we’re both wrong.

  10. missy070203 says:

    I like the Picture….. I doubt that came naturally… someone would have had to take the time to place the dead rat next to the marlboro…. nice job

  11. CumaeanSibyl says:

    @I Love New Jersey: The problem with the free market vs. government control argument re: health care is that, as far as I can tell, neither is very good at it. The government is bad at doing a lot of things, including Medicare/Medicaid, but how many horror stories have we read about private insurers here?

    Basically, I think we’re screwed either way.

  12. foo777 says:

    Every investor that holds broad stock index funds probably owns shares in a tobacco company. Does that mean that you support smoking?

    As long as insurers aren’t holding large, concentrated positions in tobacco, it doesn’t seem like a big deal. It’s not clear from the blurb what $4.5 billion represents in the context of their overall stock holdings ($100′s of billions?)

  13. WiiPoleNotIncluded_GitEmSteveDave says:

    I wonder exactly how “skewed” the results are by the fact that the Dr.’s who conducted it are pro-national health care. I also think it’s important to know that in the modern world, “Tobacco” companies aren’t just tobacco anymore. Altria, in addition to it’s tobacco business also is invested in wine/brewery companies, and also own a capitol investment company, who:

    Over the years, the company has built a diversified portfolio of assets by providing the equity portion of lease financing of domestic and international assets such as aircraft, manufacturing facilities, power generation assets and real estate.

    Since they invest in alcohol companies, do these insurance companies also deny alcohol treatment, as many commenters here claim they do with non-medical smoking cessation products?

    • madog says:

      @WiiPoleNotIncluded_GitEmSteveDave: In my mind, that makes them appear even worse. “We invest in a company that not only deals with tobacco, but alcohol as well; some of the most dangerous substances legally sold”. They might as well invest in a company that “makes” saturated fats, and also manufactures fully automatic machine guns, “for hunting”.

      It appears to be a huge conflict of interest, but money is money.

      • madog says:

        @madog: ………… Basically, I still don’t think it’s OK if some company sells cigarettes with one hand, and rainbows with the other. (to reply further to your comment)

  14. H3ion says:

    No animals were harmed in the making of this post.

  15. humphrmi says:

    A “Conflict of Interest” is a situation where the insurance companies have an interest in tobacco companies that might compromise their reliability.

    I’m not seeing that this is the case here. They might make money off of smokers (which they probably pay out a lot more on) but I don’t see them not paying benefits because they own tobacco stock.

  16. Coles_Law says:

    Well, at least in theory, since smoking represents an additional cost to them, no reason not to hedge against it. In practice, there are three glaring problems with this:

    1) The health-related impact lags the sales of the tobacco. An uptick in sales now will not manifest itself in the form of increased health problems for about 20 years.

    2) Smokers already pay a greater premium for coverage.

    3) Conflict of interest with smoking cessation drugs (as mentioned by several before me).

  17. savdavid says:

    In reply to Mr.”I Love New Jersey” I ask: Like Congress is doing a better job? What do you mean? Since when Obama took over or under Bush when they approved two wars, spying on American citizens, trillions of dollars for war and no-bid contracts that Cheney’s Halliburton profited from, cut veteran benefits, watch New Orleans drown, cut back funding on consumer protection, bailed out Wall Street? Really, I Love New Jersey, you should be more clear and informed.

    • WiiPoleNotIncluded_GitEmSteveDave says:

      @savdavid: Don’t forget that Obama has agreed with and expanded on Bush’s unwarrented wire taps, has pardoned CIA people for any torture they may have committed, floated ideas of cutting ALL veteran benefits and making them supply their own health care, written executive orders okaying massive bonuses for bank CEO’s under the bailout, etc…

  18. Megalomania says:

    Who cares? It’s not the responsibility of a health insurer to join coalitions to better people’s health, it’s their job to make good on their contracts and make money. As long as they’re doing their fiduciary duty then what does it matter.

  19. I Love New Jersey says:

    @savdavid: Says the person who seems to have ignored the trillions of dollars on pork they just passed. Yeah, nothing like decades of debt while cronies get their pockets lined.

  20. boxjockey68 says:

    OMG! That is SO funny! I am gonna forward this to everyone I know..especially my smoker friends.

  21. S-the-K says:

    Owning tobacco company stock automatically means you want everyone to smoke? For an insurance company, that makes no sense whatsoever. Insurance companies want people to stop smoking because it would decrease costs (at least for health insurance) and increase income (longer life means more monthly payments).

    As long as the smokers are not your policy holders, I don’t see the problem here. If a company can make money to pay claims, they can still tell their customers to not smoke and make it in their best interest to not smoke.

  22. Anonymous says:

    Ahh, finally – so we all agree now that using tobacco makes health care less expensive (because smokers die earlier). So can we PLEASE stop pretending that smokers are imposing extra costs on the private and government health care systems? THEY COST LESS MONEY. So new tobacco taxes aren’t recovering smokers’ “increased health care costs,” they’re simply a punitive tax for doing something the people in power don’t want other people to do.

  23. ennTOXX says:

    why doesn’t this surprise me?

    reminds me of the stories you hear about how the mafia offered protection from the mafia.

    haha, this just shows how corrupt health care is and how those of us who pay out the A$$ for it are really just cattle to them…

  24. balls187 says:

    This isn’t a conflict of interest. This is stock investing 101.

    If Tobacco shares drop, they’ll sell their stock holding, and buy other profitable stocks.

  25. NeverLetMeDown says:

    Insurers invest premiums – if they kept it all in cash, they’d have to charge higher premiums.

    Tobacco stocks are strong performers and strong businesses.

    Fundamentally, smokers are subsidizing the nonsmokers among us, and I’m fine with that.

  26. Joel Overbey says:

    The reason for the ‘investments in tobacco stocks’ is simple. They are investing in EFT’s and such. Tobacco is just part of the ‘basket of goods’ that are in such index stocks. From there it is a simple matter to calculate what percentage/value of ‘tobacco stocks’ are owned. Unless the writers of this article can point to DIRECT INVESTMENT IN TOBACCO COMPANIES, I’m going to have to call ‘Shenanigan(s)’.

  27. Spammy Jones says:

    From a business point, you can’t argue with logic. Makes perfect sense. Its all about the bottom line, the almighty dollar! Everything else is a moot point!

    Russel Tee
    http://www.online-privacy.vze.com

  28. Mac Rost says:

    Very interesting.

  29. Fran Hagler says:

    I don’t even know why this surprises me