Insurers Profit From Health Law They Fought

By Sarah Frier
Bloomberg, January 5, 2012

Insurance companies spent millions of dollars trying to defeat the U.S. health-care overhaul, saying it would raise costs and disrupt coverage. Instead, profit margins at the companies widened to levels not seen since before the recession, a Bloomberg Government study shows.

Insurers led by WellPoint Inc. (WLP), the biggest by membership, recorded their highest combined quarterly net income of the past decade after the law was signed in 2010, said Peter Gosselin, the study author and senior health-care analyst for Bloomberg Government. The Standard & Poor’s 500 Managed Health-Care Index rose 36 percent in the period, four times more than the S&P 500.

“The industry that was the loudest, most persistent critic of this law, the industry whose analysts and executives predicted it would suffer immensely because of the law, has thrived,” Gosselin said. “There is a shift to government work under way that is going to represent a fundamental change in their business model.”

The report compares the 18 months before and after the overhaul became law, Gosselin said. The companies studied are Wellpoint; UnitedHealth Group Inc. (UNH), of Minnetonka, Minnesota; Aetna Inc. (AET), of Hartford, Connecticut; Humana Inc. (HUM), in Louisville, Kentucky; and Philadelphia-based Cigna Corp. (CI)

The companies saw their average operating profit margins expand to 8.24 percent in the six quarters since the overhaul became law, compared with 6.88 percent for the 18 months before it was passed.

Commercial business now accounts for less than half of the companies’ combined revenue for the first time in at least two decades, according to the study. That’s partly a result of the companies’ growing investments in plans that provide services to Medicare and Medicaid patients, the report said.

The full text of the report:

Peter Gosselin discusses his report, “Despite Predictions, Health Insurers Prosper Under Overhaul” (5 minute video):

Peter Gosselin’s Bloomberg Government report, “Despite Predictions, Health Insurers Prosper Under Overhaul,” is further confirmation that, as long as we leave the private insurers in charge, they will always find a way to stick it to us, as we now witness a dramatic increase in insurers cornering taxpayer-financed health insurance programs – Medicare and Medicaid – not to mention the private plans that taxpayers purchase for government employees on all levels.

These trends are very healthy for the private insurance industry, but they’re enough to make us sick.