One of the things I’ve always found most fascinating about news coverage and policymaker attention to health insurers is how little focus is placed on what these companies say to their investors.
It’s no secret that each quarter, all public companies update their shareholders and provide guidance for the future. When I was at Cigna, preparing the CEO to speak with reporters and investor analysts was arguably considered the most important role I had every three months.
Mining insights from those earnings reports has been a focus of mine since I became an insurance industry whistleblower. Recently, for example, we’ve highlighted how CVS/Aetna, in particular, has taken a beating on its stock price for reporting increased spending on medical care by seniors in Medicare Advantage plans.
Now, though, CEOs have become even more public and open, beyond their quarterly earnings calls, about the challenges they are having extracting further profit from the Medicaid and Medicare programs. This should be noted, particularly by the bipartisan group of lawmakers in Washington increasingly eyeing regulatory reform on insurer practices like prior authorization, as evidence that insurers are going to become even more aggressive in limiting care to preserve their 2024 profits.
Centene’s CEO saida few days ago that medical claims are increasing in the company’s managed Medicaid business. UnitedHealth and Elevance, which owns several Blue Cross Blue Shield companies that have converted to for-profit status, also recently reported they’re seeing similar results. Combined with increased medical spending on Medicare Advantage claims, one might guess this would begin to worry investors that insurers would lower their profit forecasts.
But none of these companies have so far expressed concern about not meeting their 2024 profit expectations.
So, medical claims in Medicaid and Medicare Advantage plans – now the majority of the business for many of the largest insurers – are rising, but these companies aren’t expecting to disappoint Wall Street with a drop in profits. How is that possible?
Because insurers can deploy the tools to prevent patients from accessing care. And their playbook isn’t secret, or complicated.
By further increasing prior authorization in Medicaid and Medicare Advantage plans, insurers can limit how many seniors and low-income Americans follow through with legitimate care and procedures. (Here’s a recent congressional report on increased hurdles insurers have put in place to prevent children from receiving preventive care in Medicaid plans. And insurers’ increasing use of prior authorization in Medicare Advantage is something we’ve regularly covered.)
Unlike their marketplace and employer-based plans, insurers can’t negotiate reimbursement rates for Medicaid and Medicare Advantage plans that they manage.
But beyond prior authorization, they can put other layers of bureaucracy in place that increase how long it takes a provider to be reimbursed for providing care – and to make it more complicated for doctors to ensure they’re reimbursed fully for the care they provide.
In effect, these tactics can amount to decreasing the already industry-low rate of reimbursement for doctors from the Medicaid and Medicare Advantage programs. Physicians, you should expect to see more hurdles to reimbursement in these programs throughout the balance of 2024 as insurers look to hoard as much cash as they can.
In Medicare Advantage plans, insurers can pursue the industry jargon of a “benefit buydown” to further shift costs onto plan enrollees and off insurers themselves. Because the federal government pays insurers a flat amount per Medicare Advantage enrollee, regardless of how much health care spending each patient has, it is in the insurers’ financial interest to claim that seniors and disabled people enrolled in their plans are sicker than they really are.
Rising out-of-pocket costs that seniors and disabled people in Medicare Advantage plans are facing is a consequence of insurers wanting to squeeze further profits out of the program, and is a way to maintain direct government payments per enrollee within the insurers’ coffers.
As campaigns for November elections gear up for early voting and Congress considers bipartisan reforms to limit consolidation and enhance competition in U.S. healthcare, prospective voters are sending a cleat message to would-be office holders:
Healthcare Affordability must be addressed directly, transparently and now.
Polling by Gallup, Kaiser Family Foundation and Pew have consistently shown healthcare affordability among top concerns to voters alongside inflation, immigration and access to abortion. It is higher among Democratic-leaning voters but represents the majority in every socio-economic cohort–young and old, low and middle income and households with/without health insurance coverage., urban and rural and so on.
It’s understandable: household economic security is declining: per the Federal Reserve’s latest household finances report:
72% of US adults say they are doing well financially (down from 78% in 2021)
54% say they have emergency savings to cover 3 months expenses ($400)—down from high of 59% in 2015.
69% say their finances deteriorated in 2023. They’re paying more for groceries, fuel, insurance premiums and childcare.
Renters absorbed a 10% increase last year and mortgage interest spike has put home ownership beyond reach for 6 in 10 households
Thus, household financial security is the issue and healthcare expenses play a key role. Drug prices, hospital consolidation, price transparency and corporate greed will get frequent recognition in candidate rhetoric. “Reform” will be promised. And each sector in the industry will offer solutions that place the blame on others.
Granted, the U.S. health system lacks a uniform definition of healthcare affordability. It’s a flaw. In the Affordable Care Act, it was framed in the context of an individual’s eligibility for government-subsidized insurance coverage (8.39% adjusted gross income for households between 100% and 400% of the federal poverty level). But a broader application to the entire population was overlooked. Nonetheless, economists, regulators and consumers recognize the central role healthcare affordability plays in household financial security.
Handicapping the major players potential to win the hearts and minds of voters about healthcare affordability is tricky:
Each major sector has seen the ranks of its membership decrease and the influence (and visibility) of its bigger players increase. They’re easy targets for industry critics.
Each sector is seeing private equity and non-traditional players play bigger roles. The healthcare landscape is expanding beyond the traditional players.
Each sector is struggling to make their cases for incremental reforms while employers, legislators and consumers want more. Bipartisan support for anything is a rarity: an exception is antipathy toward healthcare consolidation and lack of price transparency.
All recognize that affordability is complicated. Unit cost and price increases for goods and services are the culprit: excess utilization is secondary.
Against this backdrop, here’s a scorecard on the current state of preparedness as each navigates affordability going into Campaign 2024:
Sector
Advantages
Disadvantages
Handicap Score1=Unprepared to5=Well Prepared
Hospitals
Community presence (employer, safety net) Economic impact Influence in Congress Scale: 30% of spending + direct employment of 52% of physicians Access to capital
Lack of costs & price transparency Unit costs inflation due to wage, supply chain & admin Shifting demand for core services. Low entry barriers for key services Regulator headwind (state, federal). Operating, governing culture Value proposition erosion with employers, pre-Medicare populations Consumer orientation
3
Physicians
Consumer trust Influence in Congress Shared savings (Medicare) Essentiality Specialization Access to technology
Care continuity Inadequacy of primary care Disorganization (fragmentation) Value of shared savings to general population (beyond Medicare) Culture: change-averse (education, licensing performance measurement, et al) Data: costs, outcomes
2
Drug Manufacturers
Increasing product demand Influence in Congress Public trust in drug efficacy Insurance structure that limits consumer price sensitivity to OOP Potential for AI -enabled discovery, market access Access to private capital Congress’ constraint on PBMs
Unit cost escalation Lack of price transparency Growing disaffection for FDA Long-term Basic Research Funding State Price Control Momentum Market access Restrictive Formulary Growth Transparency in Distributor-PBM business relationships Public perception of corporate greed
2
Health Insurers
Availability of claims, cost data Employer tax exemptions Growing government market Plan design: OOP, provider access Public association: coverage = financial security Access to private capital
Escalating premiums Declining group market Growing regulatory scrutiny (consolidation, data protection) Tension with health systems Value proposition erosion among government, employers, consumers
4
Retail Health
Non-incumbrance of restrictive regulatory framework Consumer acceptance Breadth of product opportunities Access to private capital Opportunity for care management (i.e. CVS- Epic) Operational orientation to consumers (convenience, pricing, et al) Potential with employers,
Lack of access, coordination with needed specialty care Threat of regulatory restraint on growth Risks associated with care management models
3
The biggest, investor-owned health insurers own the advantage today. As in other sectors, they’re growing faster than their smaller peers and enjoy advantages of scale and private capital access to fund their growth. A handful of big players in the other sectors stand-out, but their affordability solutions are, to date, not readily active.
In each sector above, there is consensus that a fundamental change in the structure, function and oversight of the U.S. health is eminent. In all, tribalism is an issue: publicly-owned, not for profits vs. investor-owned, independent vs. affiliated, big vs. small and so on.
Getting consensus to address affordability head on is hard, so not much is done by the sectors themselves. And none is approaching the solution in its necessary context—the financial security of a households facing unprecedented pressures to make ends meet. In all likelihood, the bigger, more prominent organizations in their ranks of these sectors will deliver affordability solutions well-above the lowest common denominators that are comfortable for most Thus, health care affordability will be associated with organizational brands and differentiated services, not the sectors from which their trace their origins. And it will be based on specified utilization, costs, outcome and spending guarantees to consumers and employers that are reasonable and transparent.
I fell down a flight of stairs at 4 a.m. last Wednesday.
It was totally my fault.
Since then, I have used hospital emergency departments in 2 states, a freestanding imaging center and a large orthopedic clinic and I’m just getting started. Six days in, I’m lucky to be alive but I still don’t know the extent of my injuries, my chances of playing golf again nor what I will end up spending on this ordeal. But nonetheless, it could have been worse. I’m alive.
Surprises in all aspects of life are never anticipated fully and always disruptive. This one, for me, is no exception. I am frustrated by my accident and uncomfortable with sudden dependence on others to help navigate my recovery.
But this is also a teachable moment., As I am navigating through this ordeal, I find myself reflecting on the system—how it works or doesn’t—based on what I am experiencing as a patient.
Here’s my top three observations thus far:
The patient experience is defined by the support team:
The heroes in every setting I’ve used are the clerks, technicians, nurses and support staff who’ve made the experiences tolerable and/or reassuring. Patients like me are scared. Emotional support is key: some of that is defined by standard operating procedures and checklists but, in other settings, it’s cultural. Genuineness, empathy and personal attention is easy to gauge when pain is a factor. By the time physicians are on the scene, reassurance or fear is already in play. Care teams include not just those who provide hands-on care, but the administrative clerks and processes that either heighten patient anxiety or lessen fear. The health and well-being of the entire workforce—not just those who deliver hands-on care—matters. And it’s easy to see distinctions between organizations that embrace that notion and those that don’t.
Navigation is no-man’s land:
The provider organizations I’ve used thus far have 3 different owners and 3 different EHR systems. Each offers written counsel about ‘patient responsibility’ and each provides a list of do’s and don’ts for each phase of the process. Sharing test results across the 3 provider organizations is near impossible and coordination of care management is problematic unless all parties agree and protocols facilitating sharing in place. Perhaps because it was a holiday weekend, perhaps because staffing levels were less than usual, or perhaps because the organizations are fierce competitors, navigating the system has been unusually difficult. Navigating the system in an emergency is essential to optimal outcomes: processes to facilitate patient navigation are not in place.
What’s clear is hospitals, clinics and imaging facilities on different EHR systems don’t exchange data willingly or proactively. And, at every step, getting approvals from insurers a major step in the processes of care.
Price transparency is a non-issue in emergency care:
The services I am receiving include some that are “shoppable” and many that aren’t. I have no idea what I will end up spending, my out-of-pocket obligations nor what’s to come. I know among the mandatory forms I signed in advance of treatment in all 3 sites were consent forms for treatment and my obligation for payment. But in an emergency, it’s moot: there’s no way to know what my costs will be or my out-of-pocket responsibility. So, the hospital and insurer price transparency rules (2021, 2022) might elevate awareness of price distinctions across settings of care but their potential to bend the cost curve is still suspect.
Patients, like me, have to fend for ourselves. I am a number. Last Wednesday, waiting 85 minutes to be seen was frightening and frustrating though comparatively fast. Duplicative testing, insurer approvals, work-shift transitions, bedside manners, team morale, and sterile care settings seem the norm more than exception.
So, for me, the practical takeaways thus far are these:
Don’t have an accident on a holiday weekend.
Don’t expect front desk and check-out personnel to engage or answer questions. They’re busy.
Don’t expect to start or leave without paying something or agreeing you will.
Don’t expect waiting areas and exam rooms to be warm or inviting.
Do have great neighbors and family members who can help. For me, Joe, Jordan, Erin and Rhonda have been there.
The health system is complicated and relationships between its major players are tense. Not surprisingly and for many legitimate reasons, my experience, thus far, is the norm. We can do better.
Paul
P.S. As I have reflected on the event last week, I found myself recalling the numerous times I called on “my doctors” to help my navigation of the system. They include Charles Hawes (deceased), Ben Womack, Ben Heavrin, David Maron, David Schoenfeld and Blake Garside. And, in the same context, the huge respect I have for clinicians I’ve known through Vanderbilt and Ohio State like Steve Gabbe and Andy Spickard who personify the best the medical profession has to offer. Thanks gentlemen. What you do matters beyond diagnoses and treatments. Who you are speaks volumes about the heart and soul of this industry now struggling to re-discover its purpose.
Abuses by payers are myriad, but these five areas could bear the most fruit for federal antitrust investigators.
Earlier this month, the U.S. Department of Justice announced it has haunched an investigation into “issues regarding payer-provider consolidation” along with other problems associated with mergers and acquisitions in health care. This is significant. For years Washington has trained its oversight authority on pharmaceutical manufacturers, private equity investments in health care and, more recently, pharmacy benefits managers controlled by big insurers. This has held bad actors like Martin Skhreli and Steward Healthcare accountable. But, it has also let insurers grow ever larger, under the radar.
No longer.
This task force will specifically evaluate the following, as an example: “A health insurance company buys several medical practices that compete with each other. It also prohibits its medical practices from contracting with rival health insurance companies.” The government will also dig into “anticompetitive uses of health care data,” “preventing transparency,” “price fixing,” and other areas that could drag nefarious activities of insurers into the spotlight.
I applaud the Department of Justice’s continued focus on these issues, building on the Department’s action announced in February to begin an antitrust investigation into UnitedHealth Group. (If you haven’t read the piece we published in February on UnitedHealth’s self-dealing that helped lead DOJ to open that antitrust inquiry, you can do so here.) The following are a few areas of low-hanging fruit that I hope the task force will focus on as they consider the impact insurers’ ongoing vertical integration has had on the overall health care system.
1. Insurers purchasing physician practices
Once a low-profile issue, Congress and the Biden administration alike have increasingly turned their focus to insurance companies – often referred to as payers – that now own and operate physician practices and clinics – those being paid. Even for someone without a law degree, it is easy to see the conflict this creates, particularly at scale.
There is the oft-cited statistic that UnitedHealth has said that through its Optum division, the company employs or otherwise controls about 10 percent of doctors in the U.S. – around 130,000 physicians and other practitioners in 16 states. This prompted me to take a closer look at publicly available information on the number of doctors employed by other insurers to get a better handle on how much control of physician practices payers now have.
It is difficult to put a percentage on physicians employed by each insurer, but it is clear that the others are following UnitedHealth’s lead. CVS/Aetna purchased Signify Health in 2023, adding 10,000 clinicians to its portfolio. The company says it supports “more than 40,000 physicians, pharmacists, nurses and nurse practitioners.”
Clearly taking a page out of UnitedHealth’s playbook, Elevance (formerly Anthem), which owns Blue Cross Blue Shield plans in 14 states announced last month a “strategic partnership” with 900 providers across several states. Elevance did not disclose the terms of the deal except to say it, “will primarily be through a combination of cash and our equity interest in certain care delivery and enablement assets of Carelon Health.”
As insurers have acquired physician practices, they also have created a rinse-and-repeat strategy associated with kicking physicians they don’t own out of network, and in some cases targeting those same practices for acquisition. Aetna and Humana recently told investors they will be reviewing their networks of physicians, signaling they’ll soon be further narrowing their networks. A good question for this task force: when insurers review those contracts with doctors, do they ever kick the doctors they employ out of network? (Doubtful.) This could specifically draw attention from the task force’s focus on “health care contract language and other practices that restrict competition,” such as contract provisions that require or encourage patients to seek care from doctors directly employed or closely controlled by patients’ insurers.
Additionally, UnitedHealth CEO Andrew Witty recently told analysts, “As I think you see some of the funding changes play out across the — across the next few years, I suspect that may also create new opportunities for us as different companies assess their positions.” My translation:UnitedHealth’s burdensome business practices and the way it shortchanges doctors (those “funding changes” he referenced) contribute to the financial distress that is forcing many health care providers to “assess their positions.”
As the task force continues to consider the impact of private equity in health care monopolies, transactions like this one should receive equal consideration for their lack of transparency and overall impact on market consolidation.
2. Co-mingling of middlemen
I have watched with interest for over the past year as both Democrats and Republicans in Washington increasingly trained their fire on pharmacy benefit managers. The natural next area of focus in that space, which this new task force could advance, should be around how the
three PBMs that control 80 percent of market share are all combined with health insurance companies – namely CVS/Aetna (Caremark), UnitedHealth (Optum Rx), and Cigna (Express Scripts).
An important, and politically popular, area where this consolidation has played out is in the squeeze placed on small, independent pharmacists across the country. More than 300 community pharmacies have closed in the past year alone, out of an inability to operate or push back on unfair margins pushed by these PBM-insurer monopolies. As we have written here, the fees these PBMs charge have increased more than 100,000 percent over the past decade, and are quietly contributing significantly to the profits of the largest health insurers.
We still have little insight into how these business lines interact with each other, and the ultimate impact that has on patients. Given the enormous influence just three insurance companies have over what prescriptions Americans can receive, and how much should be paid for each prescription, the task force would do well to focus on what insurers and PBMs are doing behind the scenes to maximize profits and limit patient access to prescription drugs. It’s already gaining traction on Capitol Hill, with one Congressman recently saying, “I’ll continue to bust this up … this vertical integration in health care.”
3. Prior authorization requests
CVS/Aetna shares were hammered after the company reported a significant increase in payment of Medicare Advantage claims during the first three month is of this year. Expect all insurers to notice. And as they have seen their forecasts fall short of Wall Street’s expectations – particularly because of increasing scrutiny in Washington of Medicare Advantage – these corporations will look to increase their already aggressive use of prior authorization to limit claims payments.
It is not as though insurers make seeking the care you need easy. Far from it. Prior authorization has become “medical injustice disguised as paperwork,” as the New York Times said in a recent, excellent video detailing the widespread nature of this profiteering practice.
While not a stated direct focus of this task force, the increased impact of prior authorization in care delivery is a direct outgrowth of a few large health insurers effectively controlling the marketplace. As insurers directly employ more doctors and enroll more Americans in their plans, they can use prior authorization to increasingly determine whether a patient can get care, period.
Scrutiny in this space could add momentum to increasing activity in state legislatures and Washington to rein in excessive prior authorization. As of early March, nine states and the District of Columbia had passed bills to limit how far insurers could go with prior authorization. And earlier this year, the Centers for Medicare and Medicaid released a final rule that is expected to save physicians $15 billion over the next decade by putting limits on insurer prior authorization tactics.
4. Rising out-of-pocket costs
Regular readers of this newsletter know one of my crusades is to ensure folks who pay good money for health insurance – out of their paychecks or through their tax dollars – can use it when they need it. It was a big win earlier this year for the Lower Out of Pockets Now coalition (which I lead) when President Biden called for a cap on prescription drug out-of-pocket costs of $2,000 annually for everybody, not just Medicare beneficiaries.
If there was true competition and real consumer choice in health insurance, payers wouldn’t be able to get away with increasingly shifting patients into high-deductible plans. But the fact that a few big players control the health insurance market has allowed the oligopoly of payers to do just that, with ever-rising deductibles alongside ever-rising premiums.
The task force’s focus on price fixing, collusion, and transparency in health care costs will, I hope, include some focus on how insurers use their size and clout to drive up out-of-pocket costs and premiums simultaneously – with little recourse to employers or their employees.
5. Implementing crystal clear laws and rules in health care
You know you’re a monopoly or close to it when you can pretty much do whatever you want and get away with it. Look no further than America’s health insurance companies and implementation of the No Surprises Act.
As I wrote earlier this year, Congress and CMS have been clear about how out-of-network hospital bills should be negotiated between insurers and physicians. Yet in case after case, including many that have become the basis of lawsuits, insurers are clearly flouting the Act passed by Congress and the rules promulgated by CMS. Payers are doing this, doctors have said, simply because of their size and ability to weather criticism from physicians, regulators, and the courts – while doctors struggle to pay their bills with significant payments still owed pending out-of-network negotiations with insurers.
One would hope, at a minimum, this task force, focused on rooting out the ills of monopolies, would document how insurers are well aware of how they are supposed to implement legislation like the No Surprises Act, but flout it anyway.
ALSO: We’re premiering our Magic Translation Box to help you decipher corporate jargon and understand what’s coming down the pike.
If you are enrolled in an Aetna Medicare Advantage plan, now might be a good time to get more nervous than usual.
Wall Street is not happy with Aetna’s parent, CVS Health. In response to that unhappiness, triggered by the company’s admission that it has been paying more claims than usual, CVS execs have promised to do whatever it takes to get profit margins back to a level investors deem suitable.
That means the odds have increased that Aetna will refuse to cover the treatments and medications your doctor says you need. It also means CVS/Aetna likely will increase your premiums next year and might dump you altogether. The company has a long history of doing just that, as you’ll see below.
Medicare Advantage companies in general are facing what Wall Street financial analysts call headwinds, and those winds are now coming from several sources: increased Congressional scrutiny of insurers’ business practices, Biden administration efforts to end years of overpayments that have cost taxpayers hundreds of billions of dollars, enrollee discontent, and a gathering storm of negative press.
To understand the pressures CVS CEO Karen Lynch and her C-Suite team are under to satisfy the company’s remaining shareholders (many have fled), you need to know and understand what they told them in recent weeks–and what she undoubtedly will have to say again, with conviction, this coming Thursday when CVS holds its annual meeting of shareholders. You can be certain Lynch’s staff has prepared a binder chock full of the rudest questions she could face from rich folks (mostly institutional investors) who’ve become a little less rich in recent months as the golden calf calf called Medicare Advantage has lost some of its luster. (My former colleagues and I used to put together such a CEO-briefing binder during my Cigna days, which coincided with Lynch’s years at Cigna.)
To help with that understanding, we’re introducing the HEALTH CARE un-covered Magic Translation Box (MTB). We’ll fire it up occasionally to decipher the coded language executives use when they have to deal with analysts and investors in a public setting. We’ll start with what Lynch and her team told analysts on May 1 when CVS announced first-quarter 2024 results that caused a stampede at the New York Stock Exchange.
Lynch: We recently received the final 2025 (Medicare Advantage) rate notice (from the Center for Medicare and Medicaid Services), and when combined with the Part D changes prescribed by the Inflation Reduction Act, we believe the rate is insufficient. This update will result in significant added disruption to benefit levels and choice for seniors across the country. While we strive to deliver benefit stability to seniors, we will be adjusting plan-level benefits and exiting counties as we construct our bid for 2025. We are committed to improving margins.
Magic Translation Box: Can you believe it? CMS did not bend to industry pressure to pay MA plans what we demanded for next year. We only got a modest increase, not enough, in our opinion, to protect our profit margins. To make matters worse, starting next year we won’t be able to make people enrolled in Medicare prescription drug plans (Part D) pay more than $2,000 out of their own pockets, thanks to the Inflation Reduction Act President Biden signed in 2022. So, to make sure you, our most important stakeholder, once again have a good return on your investment, we will notify CMS next month that we will slash the value of Medicare Advantage plans by reducing or eliminating some benefits, like dental, hearing and vision, that attract people to MA plans in the first place. And, for good measure, we’ll be dumping Medicare Advantage enrollees who live in zip codes where we can’t make as much money as we’d like. For them: too bad, so sad. For you: more money in your bank account. And for extra good measure, to keep seniors from blaming greedy us for what we have in store for them, our industry will be bankrolling dark money ads to persuade voters that Biden and the Democrats are the bad guys cutting Medicare.
Later during CVS’s earnings call, CFO Thomas Cowhey reiterated Lynch’s remarks about reducing benefits.
Cowhey:So, we’ve given you all the pieces to kind of understand why we think it (Medicare Advantage) will lose a significant amount of money this year. But as you think about improvement there, obviously there’s a lot of work that we still need to do to understand what benefits we’re going to adjust and what ones we can and can’t…To the extent that we don’t believe we can credibly recapture margin in a reasonable period of time, we will exit those counties…(And) as we’ve all mentioned we’re going to be taking significant pricing actions and really it’s going to depend on what our competitors do.
Magic Translation Box: We’re under the gun to figure this out because we have to notify CMS by June 3 how much we will increase Medicare Advantage premiums and cut benefits next year and which counties we’ll abandon altogether. We’ll also be watching what our competitors do, but we know from what they’ve been telling you guys that they, too, will be dumping enrollees, hiking premiums and slashing benefits.
To make sure investors couldn’t miss what they were saying, Lynch jumped back into the conversation to make clear they knew they were #1 in her book:
Lynch: I’m just going to reiterate what I said in my prepared remarks. (You can bet what follows were prepared, too.) We are committed to improving margin in Medicare Advantage [emphasis added] and we will do so by pricing for the expected trends. We will do so by adjusting benefits and exiting service counties. And we are committed to doing that.
Magic Translation Box: Have I made myself clear? We will do whatever it takes to deliver the profits you expect. We will keep a closer eye on how much care people are trying to get and we’ll swing into action faster next time if we see evidence of an uptick. There will be carnage, but you guys rule. You mean a lot more to us than those old and disabled people who don’t have nearly as much money as you do in their bank accounts.
This will not be the first time Aetna has dumped health plan enrollees who were a drain on profits. In 2000, when Medicare Advantage was called Medicare+Choice, Aetna notified the Clinton administration it would stop offering Medicare plans in 14 states, affecting 355,000 people, more than half of Aetna’s total Medicare enrollment at the time. Other companies, including Cigna, did the same thing. My team and I wrote a press release to announce that Cigna would be bailing from almost all the markets where we sold private Medicare plans.
We of course blamed the federal government (i.e., the Democrats) for being the skinflints that made it necessary to bail. Our CEO at the time, Ed Hanway, said the government just couldn’t be relied upon to be a reliable “partner.”
Back then, just a relatively small percentage of Medicare beneficiaries were in private plans. Today, more than half of Medicare-eligible Americans are enrolled in a Medicare Advantage plan, which means the disruption could be much worse this time. Some people in counties where Aetna and other companies stop offering plans likely will not find a replacement plan with the same provider network, premiums and benefits.
But in most places, those who get dumped will be stuck in the volatile, often nightmarish Medicare Advantage world, unable to return to traditional Medicare and buy a Medicare supplement policy to cover their out-of-pocket obligations.
That’s because in all but a handful of states, seniors and disabled people will not be able to buy a Medicare supplement policy as cheaply as they could within six months of becoming eligible for Medicare benefits. After that, Medicare supplement insurers, including Aetna, get their underwriters involved. If your health isn’t excellent, expect to pay a king’s ransom for a Medigap policy.
The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected.
At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.
I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.
While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below.
I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”
A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.
The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.
The good effects of the ACA:
Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech).
The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid (in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).
The not-so-good effects of the ACA:
As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets.
To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.
We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.
BY THE NUMBERS
In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance.
In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.
The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements.
Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.
Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.
SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS
Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.
NOTE: The Dow Jones Industrial Average is listed on this chart as a reference because it is a leading stock market index that tracks 30 of the largest publicly traded companies in the United States.
REVENUES collected by those seven companies have more than tripled (up 346%), increasing by more than $1 trillion in just the past ten years.
PROFITS (earnings from operations) have more than doubled (up 211%), increasing by more than $48 billion.
The CEOs of these companies are among the highest paid in the country. In 2022, the most recent year the companies have reported executive compensation, they collectively made $136.5 million.
U.S. HEALTH PLAN ENROLLMENT
Enrollment in the companies’ health plans is a mix of “commercial” policies they sell to individuals and families and that they manage for “plan sponsors” – primarily employers and unions – and government/enrollee-financed plans (Medicare, Medicaid, Tricare for military personnel and their dependents and the Federal Employee Health Benefits program).
Enrollment in their commercial plans grew by just 7.65% over the 10 years and declined significantly at UnitedHealth, CVS/Aetna and Humana. Centene and Molina picked up commercial enrollees through their participation in several ACA (Obamacare) markets in which most enrollees qualify for federal premium subsidies paid directly to insurers.
While not growing substantially, commercial plans remain very profitable because insurers charge considerably more in premiums now than a decade ago.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2) Humana announced last year it is exiting the commercial health insurance business. (3) Enrollment in the ACA’s marketplace plans account for all of Molina’s commercial business.
By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS.
Of the 65.9 million people eligible for Medicare at the beginning of 2024, 33 million, slightly more than half, enrolled in a private Medicare Advantage plan operated by either a nonprofit or for-profit health insurer, but, increasingly, three of the big for-profits grabbed most new enrollees. Of the 1.7 million new Medicare Advantage enrollees this year, 86% were captured by UnitedHealth, Humana and Aetna. Those three companies are the leaders in the Medicare Advantage business among the for-profit companies, and, according to the health care consulting firm Chartis, are taking over the program “at breakneck speed.”
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2,3) Centene’s and Molina’s totals include Medicare Supplement; they do not break out enrollment in the two Medicare categories separately.
It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.
OTHER FEDERAL PROGRAMS
In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.
Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above.
At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues.
WHAT TO DO AND WHERE TO START
The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans. But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.
Several bipartisan bills have been introduced in Congress to change how big insurers do business.
And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.)
I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.
HENRY KOTULA 