Health Insurers Profit from Me and For Me

Over the summer United Healthcare, my health insurance company, announced that it would no longer sell health insurance in the individual market in Pennsylvania, where I live.

The company gave no plausible explanation, but they thanked us for our patronage and said we were welcome to find another health insurer, which we will.

Now, I read enough articles to know that health insurance companies are leaving Pennsylvania and other states because the exchange market is not profitable enough for them.

The health insurers publicly claim they are losing money in the exchanges. Maybe they are, maybe not. It’s impossible to tell without them breaking out the individual health plans separately, but overall the health insurers are very profitable.

United Healthcare reported third quarter profits of $1.98 billion, a jump of 23 percent over the year-ago quarter.

The company said revenues in each of business segments, employer and individual markets, Medicare and retirement markets, and Medicaid, community and state markets, are up by double-digit percentages.

Revenues aren’t the same as profits, of course, but it’s hard for a health insurer with those kinds of numbers to claim they aren’t making money – and to do so with a straight face.

What insurers mean when they say they are “losing” money is that they are not making enough money quickly enough in some of their business segments so they’ve got to dump policyholders – like my family – to satisfy shareholders who benefit from stock price appreciation.

And who would those shareholders be? My family, of course, and you as well through mutual fund holdings like the Vanguard Health Care Fund.

Assets in that fund topped $44 billion at last count and the fund has returned 10.79 percent annually since 2001, Vanguard’s data indicate.

The fund’s top holding by sector is pharmaceuticals, companies like Bristol-Myers Squibb, Merck and Eli Lilly. Other big sector holdings of the fund include biotechnology companies and health care equipment makers.

But the single largest holding is? You guessed it: United Health Group, the parent company of United Healthcare, my soon-to-be ex-health insurance company.

December (and March) are a good time for investors in Vanguard’s Health Care Fund. That’s when the fund pays dividends.

December also is the deadline to renew health insurance coverage in the individual market. It's the time when those of us in that market reel in horror at rising premiums and deductibles and grumble about money-grubbing health insurers.

The love-hate relationship with health insurance never ends. Health insurers slowly strip you naked of coverage by raising prices and deductibles and slash costs by moving customer service offshore.

At the same time, health insurers do their part in showering your fund in your individual retirement account with generous dividends and capital gains.

As health care policyholders, we grow poorer. As mutual fund shareholders and investors, we grow richer.

Makes you wonder how long this kind of game can keep going, and if there’s a better way.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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