https://healthcareuncovered.substack.com/p/new-study-reveals-unitedhealths-hidden?utm_source=post-email-title&publication_id=255152&post_id=178509920&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

Research suggests UnitedHealth may be running a shell game — one that lets insurers flout regulations and obscure the harmful consequences of their vertical integration strategies.

A new Health Affairs study has confirmed that UnitedHealth Group — the nation’s largest health care conglomerate — is doing more than dominating the market; it’s playing by a different set of rules.

Researchers Daniel Arnold of Brown University and Brent Fulton of UC Berkeley analyzed new federal “Transparency in Coverage” data and found that UnitedHealth’s insurance arm, UnitedHealthcare, pays its own Optum physicians 17% more on average than it pays other doctors for the same services. And in markets where UnitedHealthcare holds a large share — 25% or more — that gap explodes to 61%.

The Affordable Care Act’s medical loss ratio (MLR) rule requires insurers to spend at least 80–85% of premium revenue on patient care, rather than on administrative expenses and profits, but if an insurer can funnel “medical spending” to its own subsidiaries — in this case, the thousands of subsidiaries that now comprise Optum — it can appear to comply with the law while actually shifting massive amounts of revenue from one pocket to another.

Under the MLR rule, insurers are required to send rebate checks to their customers if they don’t comply with the MLR requirement. The Health Affairs research suggests that UnitedHealth may be flouting that rule by deliberately overpaying the health care delivery operations it owns to comply with the letter of the law if not the intent. Because physician practices and other provider entities are exempt from the MLR rule, regardless of ownership, UnitedHealth can avoid sending its customers the rebates they otherwise would get and pad the conglomerate’s bottom line.

As the researchers put it:

“The results suggest that intercompany transactions within health care conglomerates may warrant scrutiny, as they may be signals of regulatory gaming or attempted foreclosure.”

Another way to game the system

This study also highlights another consequence: independent physician practices are being squeezed out. When UnitedHealth pays Optum doctors more — and non-Optum doctors less — it creates an uneven playing field that could drive small and mid-sized practices out of business.

The authors warn that this pattern “could lead to independent practices closing or joining larger groups such as Optum”. Over the past decade, Optum has quietly amassed more than 90,000 doctors under its control — more than any other private organization in the country.

And it’s not just doctors – UnitedHealth owns nearly 2,700 entities – a pharmacy benefit manager, a data analytics firm, home health companies and even surgery centers. The study notes that in 2024, Optum reported $253 billion in revenue, but 60% of that was simply money moving internally from UnitedHealthcare. In other words, UnitedHealth’s empire is built on being able to feed itself by self-dealing.

The point

This research provides some of the strongest evidence yet that UnitedHealth’s “vertical integration” strategy is distorting the market — not to improve care but to maximize profits under the guise of “compliance.”

For regulators at the Department of Justice, the Department of Labor (which has jurisdiction over employer-sponsored plans administered by UnitedHealth and other insurers) and the Centers for Medicare and Medicaid Services, this should be a wake-up call. As the authors conclude, even a 1% artificial price increase through these internal transfers could significantly reduce the rebates insurers owe consumers under the medical loss ratio rule. That’s billions of dollars that patients, taxpayers and employers are entitled to but that never leave the company’s bank account – except to reward shareholders and top executives. During just the first nine months of this year, UnitedHealth reported making nearly $19 billion in profits on revenues of more than $334 billion. Both revenues and profits likely would have been considerably less if not for the apparent gaming the Health Affairs researchers uncovered.