It’s Money For Nothing When The Risk Is Free

I’ve often argued that health insurance companies in the U.S. provide almost no real insurance because they assume almost no actual risk from the people they cover. I think their financial disclosures from last year back up what I’ve been saying.

By David Belk

I’m sure you are all aware that last year we suffered through a once-in-a-century pandemic that caused millions of people to be hospitalized and killed several hundred thousand of them. Now, you might think that such a healthcare disaster would be the sort of thing that would seriously harm the finances of a health insurance company, right?

Think again!

I’ve often argued that health insurance companies in the U.S. provide almost no real insurance because they assume almost no actual risk from the people they cover. I think their financial disclosures from last year back up what I’ve been saying.

From the 10-K financial disclosures of the six largest U.S. health insurance companies:

2019 Profit       2020 Profit  (In billions of dollars)


United Health                      $13.8                $15.4
Anthem                                $4.81               $4.57
Cigna/Express Scripts         $5.12               $8.46
CVS/Aetna                          $6.63                $7.18
Humana                              $2.71                $3.37
Centene/Wellcare               $1.80                $1.81


Totals                                 $34.9                $40.8

So year-over-year profits increased by an average of about 17% for the largest health insurance companies last year.

Now you might be wondering, how did they pull that off? Sure, the health insurance companies might have insulated themselves from any real risk, but how could they turn a once-in-a-century healthcare disaster into a financial windfall?

First, I should mention that healthcare costs for these companies did increase overall (though not by as much as their revenues increased). The total number of people these companies “insured” increased as well.

However, since so many people lost their jobs (and insurance coverage) last year, the health insurance companies lost quite a few commercial (non-Medicare and non-Medicaid) members. These companies more than made up for that loss, though, by substantially increasing the numbers of Medicare and Medicaid recipients they enrolled.

But wait! (I hear you cry) Wouldn’t Medicare and Medicaid recipients be the most expensive people to cover since they were the people most likely to be hospitalized last year, often for weeks? Shouldn’t the insurance companies have lost money by signing up so many of these high risk people?

No, and here’s why: Health insurance companies don’t really “cover” most of the Medicare or Medicaid recipients who sign up for their plans; not with their money, anyway. Instead, they “manage” money that flows from the federal and state governments through them and into healthcare, much the way clams and oysters “manage” the seawater that flows through them.

The more money that flows through the insurance companies and into healthcare, the more money these companies get to keep.

This is why the health insurance companies were going full throttle last year in signing up as many Medicare Advantage patients as they could– during a pandemic. If insurance companies had to assume any real risk for covering these people, they would have avoided them like, well, COVID-19. Instead, the insurance companies spent much of last year pushing Medicare Advantage plans on seniors like Timeshares in Aspen.

Now you know why you were seeing those Advantage commercials full of dancing seniors everywhere last fall. You can also see why the insurance companies are enticing seniors to sign up for those plans by offering free gym memberships, rides to their doctors, tickets to Disneyland, etc… to the seniors who enroll in those plans.

But mostly these financial disclosures show us that, no matter how badly things are going for us, we can always count on the health insurance companies to find a way to profit from our misfortunes.

How’s that for a feel-good thought of the day?

David Belk MD
Internal Medicine
https://truecostofhealthcare.org

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