March 07, 2013
Proposal Challenges TIAA-CREF on For-Profit Health Insurance
by Robert Kropp
Advocacy groups urge the pension fund to divest its holdings in private health insurance companies,
arguing that the industry has a well-documented history of unethical behavior and abuses.
Should sustainable institutional investors hold the stocks of private health insurance companies in
It's a question that advocates for a single-payer healthcare
system is asking the Teachers Insurance and
Annuity Association - College Retirement Equities Fund (TIAA-CREF), the financial services
organization and one of the nation's largest pension funds. A signatory to the United Nations' Principles for Responsible Investment (PRI),
TIAA-CREF states in its investment philosophy that it seeks "to invest in areas that affect social
change and environmental stewardship while also producing competitive financial returns."
There's no doubt that private health insurance companies such as CIGNA, Humana, Aetna,
Coventry, and WellPoint help TIAA-CREF's portfolio produce competitive financial returns. According
to Healthcare-NOW!, an organization
advocating for the passage of single-payer healthcare legislation, average profits for the five
companies increased by almost 50% during the fiscal year that ended in July, 2011. Meanwhile, 3,700
families file for bankruptcy every day in the US, and cite illness and medical bills as the primary
causes. Sixty percent of those filing for bankruptcy had private insurance.
A 2012 study by physicians associated with Physicians for a National Health Program (PNHP) found that Medicare
had overpaid private insurance companies in the amount of $282.6 billion since 1985, most of which
occurred in the last eight years.
In 2011, Healthcare-NOW! and PHNP launched the Divestment Campaign for Health Care,
which in 2012 informed TIAA-CREF of its intention to file a shareowner resolution calling for
divestment from private health insurance companies. The Campaign withdrew the proposal for one year
after TIAA-CREF and MSCI, its vendor for environmental, social, and corporate governance (ESG)
ratings, agreed to dialogue.
Sandra Fox of the Campaign described the engagement in a recent blog post.
"TIAA-CREF representatives indicated the company will continue to employ the 'best in class'
approach and rely on MSCI's ratings," Fox wrote. "TIAA-CREF would not divest from health insurance
companies but encouraged us to continue to provide information to MSCI relevant to our concern."
"We informed TIAA-CREF that we were not happy with their response and would resubmit our
shareholders proposal in 2013," Fox continued.
The proposed resolution for 2013, submitted
by Fox and Johanna W.H. van Wijk-Bos of the Presbyterian Church, states, "Health insurance
companies make money by denying coverage, raising premiums, and increasing out-of-pocket costs, and
spend 15-30% of the healthcare dollar on administrative overhead (including profit, exorbitant
executive salaries, and marketing costs) compared to less than 2% for traditional Medicare."
Furthermore, the resolution continues, private health insurers "testified before the US House
Subcommittee on Oversight and not only admitted to their company's practice of rescission, or
cancelling people's insurance when they become very ill, but refused to stop the practice."
"Participants request that TIAA-CREF exclude health insurance companies from the portfolio fund
of CREF-Social Choice, in accordance with reasonable expectations for socially responsible
investing," the resolution concludes.
Institutional investors are typically more prone to
engagement than divestment, and TIAA-CREF is not the only sustainable investor with holdings in
private health insurers. The Interfaith Center on
Corporate Responsibility (ICCR) says its members are "asking our health insurance companies to
redesign their benefit models, provider networks and payment models to amplify access and to limit
"Premiums for employer-provided family coverage increased 113% in 2011
over premiums in 2001, while workers' share of cost for this coverage has increased 130% over the
same period," ICCR states.
Meanwhile, Representative John Conyers of Michigan
re-introduced the Expanded and Improved Medicare for All Act (HR 676) last month. "Many Americans
are frustrated with high out-of-pocket costs, skyrocketing premiums, and many other serious
problems that are part and parcel of a healthcare system dependent on private health insurance
plans," Conyers stated. "HR 676 would reform this broken system."