Health Insurers Hedge Bets With Fast Food Stock

Companies providing life and health insurance owned $1.9 billion worth of stock in the fast-food industry as of June 11, 2009, researchers reported online in the American Journal of Public Health.

The investments were in the five largest fast-food corporations -- Jack in the Box, McDonald's, Burger King, Yum! Brands (KFC, Taco Bell, Pizza Hut, and others), and Wendy's/Arby's, according to J. Wesley Boyd of Harvard Medical School and Cambridge Health Alliance in Massachusetts and colleagues.

"The insurance industry, ostensibly, appears to be concerned about people's health and well-being," Boyd said.

But, he said, "If the insurance industry is willing to invest in products known to be harmful and/or kill people then, prima facie, this is not an industry that actually cares about health and well-being."

Although Boyd acknowledged that fast food can be consumed responsibly, he said the aggregate evidence points toward a negative effect on public health.

"We argue that insurers ought to be held to a higher standard of corporate responsibility," he and his co-authors wrote in their paper.

All of the study authors are members -- and two are co-founders -- of Physicians for a National Health Program, a nonprofit organization advocating for universal, single-payer national health insurance.

"PNHP opposes for-profit control, and especially corporate control, of the health system and favors democratic control, public administration, and single-payer financing," the organization's mission statement reads.

Boyd said that the passage of healthcare reform makes the issue of owning stock in fast-food companies especially important.

"The health insurance industry is going to have a much bigger stake in providing healthcare, and what we're doing in our paper is reminding people that [the industry's] primary interests are in earning money and generating profit, not in insuring people's health," he said.

Pauline Rosenau, a professor of management, policy, and community health at the University of Texas School of Public Health, said the investment strategy of these insurance companies is not ethical.

"They are placing themselves in a situation of substantial conflict of interest -- especially starting in 2014," she said.

"Starting in 2014, insurers will have an even greater incentive to encourage their customers to pursue healthy food choices," she continued. "However, this is only with respect to their own customers, not those insured by other companies. As long as insurers are largely private, for-profit entities, they are unlikely to identify with a public health orientation."

To determine the extent to which insurance companies invested in the fast-food industry, Boyd and his colleagues analyzed shareholder data from the Icarus database, which contains information from Securities and Exchange Commission filings and reports from news agencies.

Their data were "vetted during the peer-review process by outside referees," according to a spokesperson for the American Public Health Association, which publishes the American Journal of Public Health.

The $1.9 billion worth of stock in the five leading fast food companies represented 2.2 percent of the total market capitalization of those companies on June 11, 2009.

Most of the investments ($1.2 billion) were in McDonald's, followed by Yum! Brands ($404.2 million), Burger King ($165.5 million), Jack in the Box ($120 million), and Wendy's/Arby's ($15 million).

The insurer investing the most in fast food -- $422.2 million -- was Northwestern Mutual, which offers life, disability, and long-term care insurance.

Next highest at $406.1 million was ING, a Dutch investment company selling life and disability insurance.

Massachusetts Mutual, which offers life, disability, and long-term care insurance, and Prudential Financial, which sells life insurance and long-term disability coverage, ranked third and fourth at $366.5 million and $355.5 million, respectively.

At first glance, it would appear that there is an inconsistency with insurance companies that have an interest in protecting health investing in the fast-food industry, although Boyd said that it makes sense financially.

"They're hedging their bets," he said. "First of all, they're making money by directly investing in fast food, and, secondly, they're making money by often charging higher premiums to people who've eaten a little too much fast food and are obese, have diabetes, cardiovascular disease, high blood pressure, etc."

He said that he would like to see insurance companies sell their stakes in the fast-food companies.

"But if they don't divest, at a minimum they could use their position as owners of fast food to insist on higher quality products, lower calories, [and] better information about how many calories are in different foods," he said.

Dr. David Orentlicher of the William S. and Christine S. Hall Center for Law and Health at Indiana University agreed that insurers should be held to a higher standard of corporate responsibility.

"That said," he said, "it is very difficult in a capitalist society to expect people or companies to act against their self-interest. If we want people to act responsibly, we have to create financial incentives for them to do so."

Theodore Marmor, a professor emeritus of public policy and management at Yale School of Management, did not agree that health and life insurers should be held to a different standard than other companies.

"I think this is a foolish approach to improving the health of the public," Marmor said.

"It would be hard to find any corporation that did not have some effect on the public's health. Why are insurers to be held to a higher standard? We have more important worries about health insurers than improving their stock portfolios -- e.g., their behavior as insurers."

ING did not respond to a request for comment.

In a statement, a spokeswoman for Northwestern Mutual disputed the study's figures, saying that the company's stock holdings in the fast-food industry at the end of 2008 totaled less than $257 million. The current total is slightly less at $248 million, or 0.17 percent of a $146.1 billion portfolio, she said.

A spokesman for Massachusetts Mutual said the reported investments were "absolutely incorrect." He said that as of Dec. 31, the company owned about $1.4 million worth of stock in fast-food-related companies, which was "less than one-hundredth of one percent of cash and total invested assets of $86.6 billion."

A Prudential Financial spokesman said, "We can't discuss specific investments within Prudential portfolios or those managed for third parties. That said, we have a fiduciary duty to manage assets in a way that provides the opportunity for consistently strong investment performance to our individual and institutional clients, while managing risk and investing responsibly."

A spokesman for America's Health Insurance Plans (AHIP), a trade group for health insurers, said he could not comment on the investments of individual companies.

"Our industry is strongly committed to health and wellness," he said. "Health plans have pioneered programs to promote prevention and encourage people to live healthier lifestyles."

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