Dan Haar: Soaring Health Insurance Profits Add Intrigue To Obamacare Debate
Their mega-mergers collapsed in lawsuits by the Obama administration's
Profits at the end of 2016 were less than stellar except at
Months later, the party hasn't slowed, it's picked up even more energy. The companies --
Could all this success bring a cost as the nation endures rising prices and political gridlock over reform?
For the Big Five, it's a sweet-spot built on a solid foundation: commercial health plans enjoying flat use of medical services by middle-class customers who now must pay thousands of dollars out of their own pockets; cost-cutting by the companies; growing Medicare and Medicaid management business; and broad exits from the perilous Obamacare exchanges.
The profits and the market gains are drawing attention, not all of it welcome. Consumers don't like paying rising premiums and big bucks for medical services that were once fully covered at a time of exploding profits by the companies.
Politicians bickering over the crisis in the individual and low-income markets could give the industry less than what it wants -- in tax breaks, indirect subsidies, coverage mandates and other hotly debated policies.
For now, as all hands focus on Obamacare, we have yet to see a backlash. Experts say the big managed care companies are well insulated as they lobby for favorable treatment with hefty profits in their pockets.
"Absolutely it does make it more difficult," said
But Sood added, "They're so essential to the system that it's hard to imagine" a spurning in new laws and regulations.
For starters, what's being debated in
Even if it were, punishing the insurers could hurt elected officials' constituents.
And in the lucrative commercial markets, "I don't think they want to get anything out of
Also working in the managed care giants' favor is the fact that many traditional combatants -- doctors, hospitals, consumer groups, advocates for the poor and insurers large and small -- are now working together to save the embattled Obamacare subsidies and the cost-sharing reduction payments that President
Those CSR payments, an estimated
The companies leave the talking on health care reform to their trade group,
High profits for the biggest managed care players that are mostly off the exchanges? That's not making policy efforts more difficult, said AHIP spokeswoman Kristine Grow.
Still, with consumers ever-more aware of medical costs, Grow said, "It's much more important for us to be able to clearly articulate to people that we do bring more value ... That becomes part of the conversation that we have."
It's a conversation in part about innovation. Out-of-control health care spending of
"We need to ask whether insurers are growing profits because they are innovating to meet the needs of patients clamoring for lower costs and higher quality, or whether they are merely benefiting from market power and favorable regulations," said
The companies say loudly and often that they're innovating in disease management and in the long, slow transition from fee payments for every medical service to payments for population health management. How they're doing is a matter of debate.
Dranove, a key witness for the
That's remarkable, as profits run into the tens of billions of dollars a year. Looking at net operating profits -- the take-home from the core business -- we see that all five companies tallied more in either the spring or winter quarters than they had made in any single quarter since at least 2010.
And for all five, the trend is clearly up -- disrupted in recent quarters only by the billions of dollars all of them except
Backlash or not, the companies are being watched closely. Obamacare reforms put a partial brake on those profits by setting minimum percentages each health plan must spend on medical care rather than administration and profits.
Looking ahead, analysts predict continued strong performance driven by trends in the commercial markets and rise of
"It's hard to find a subsector within health care that has all those tailwinds," said Sood, at
"There's going to be a lot of eyes on them," said
"I think there will be a backlash but it's going to be at the consumer level," Cameron said. "The challenge is that consumers don't have a very large voice."
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