Big Healthcare Insurers Doing Better Than They Want to Admit

Obamacare is in the headlines again for underpayment to an insurance company. Sanford Health Plan is suing the government for $9 million owed in “risk corridor” payments for insurance plans in the Dakotas and Iowa.

It is one of several insurers to send in the lawyers. Insurers don’t mind suing because it reinforces, in the minds of voters, that Obamacare is falling apart since it doesn’t cough up enough money for insurance subsidies. For 2014, several insurance companies claimed $2.87 billion in losses.

But while some insurers have undoubtedly done poorly under Obamacare, the Big 5, Aetna, Anthem, Cigna, Humana, and UnitedHealth, have done much better than they want to admit. The insurance lobbying group AHIP has even released an infographic for 2014 to help blur this fact.

The graphic claims to show how the insurance healthcare dollar is divided up: 22.1 cents goes to prescription drugs; 22 cents for physician services; 19.8 cents for outpatient services; 15.8 cents for inpatient services; 17.8 cents for operating costs; and a mere 2.7 cents for net margin, or profits.

What this purports to show is that insurance companies have a much smaller slice of the pie than many other parts of the healthcare sector and their profits are tiny. However, if you look at the Big 5, the story is a very different one.

Looking at Securities Exchange Commission data for 2014, the year AHIP highlighted, we see that the Big 5’s operating costs came to 19.67 cents on the dollar and net profits were higher as well, at 4.4 cents on the dollar.

That may not sound like much more but it adds up. In profits and overhead, these insurance companies eat up 24.04 cents on every dollar that passes through them, for the single largest slice of the pie.

AHIP claims to have chosen the data for the industry infographic from a “random selection of insurers” but if so it is a randomness that somehow missed all or most of the biggest players.

In reality, it’s likely that the health insurance lobby cherry picked toward smaller, sicker insurance companies. According to their own premium dollar number crunching, the total medical expenses of those insurers included in the study is $104 billion. According to SEC filings by the Big 5, medical expenses for that year topped $300 billion.

And bear in mind that the Big 5 are called that for a reason. In contrast to the few dozen odd smaller health insurance companies that were taking in part in Obamacare in 2014 (several of which have been gobbled up since), over half of America’s insured population get their coverage through one of these larger insurers.

Unless we can tempt new players into the health insurance business or a smaller, innovative insurer goes gangbusters, the big five are the future of the health insurance industry as we can foresee it. We shouldn’t let Obamacare lawsuits or deceptive infographics distract us from this reality.

The post Big Healthcare Insurers Doing Better Than They Want to Admit appeared first on RedState.