“In a highly vertically integrated healthcare organization like UnitedHealth Group, this technicality becomes a powerful tool to obscure how internal transactions inflate profits, consolidate market power, and ultimately drive up costs for patients and employers.”
By Josua Brooket on Linkedin
48.86% of United Healthcare Premiums went to Optum…
A few days ago, I came across an insightful post by Chris Deacon about the concept of eliminations in healthcare. Her explanation struck a chord with me:
“At its core, eliminations reflect transactions between UnitedHealth’s insurance arm (United Healthcare Group) and its health services arm (Optum – which includes physician groups, OptumRx, Change Healthcare, etc). Technically speaking, eliminations are accounting adjustments made to remove internal transactions from consolidated financial statements to avoid double-counting revenue and expenses. In a highly vertically integrated healthcare organization like UnitedHealth Group, this technicality becomes a powerful tool to obscure how internal transactions inflate profits, consolidate market power, and ultimately drive up costs for patients and employers.”
Inspired by her post, I dug deeper into the 10-K SEC filings for FY 2023 from several major healthcare companies. Federal law mandates that health insurance companies spend 80%-85% of premiums on healthcare costs. However, based on conversations with insurance regulators, once funds are shown on paper as a cost of care and are no longer held by the insurer, they fall outside the jurisdiction of insurance oversight.
Here’s the key finding: UnitedHealthcare’s insurance division reported over $279 billion in premiums for 2023. Of this, a staggering 48% was funneled to its own subsidiaries under Optum, including their PBM (Pharmacy Benefit Manager) and physician groups. This effectively shifts money from one pocket to another within the same organization, sidestepping regulatory scrutiny.
The same pattern is evident at Aetna/CVS, another vertically integrated giant. Both of these organizations have a significant presence across Group, Medicare, Medicaid, and Individual markets, which means their practices directly shape the cost and quality of care for millions of Americans.
It raises an important question: How do we ensure that regulatory frameworks evolve to address these complexities and protect patients and employers from the rising costs associated with this vertical integration?
Let’s discuss. What are your thoughts?
