Making a killing under Obamacare: The ACA gets blamed for rising premiums, while insurance companies

[applegrove]

Making a killing under Obamacare: The ACA gets blamed for rising premiums, while insurance companies are reaping massive profits

by Angelo Young at Salon

http://www.salon.com/2016/10/28/making-a-killing-under-obamacare-the-aca-gets-the-blame-for-rising-premiums-while-insurance-companies-are-reaping-massive-profits/

"SNIP............

While Americans continue to fork out more money, insurers are doing great.

On Thursday, Aetna reported $734 million in profit on $15.8 billion in revenue for the three months that ended Sept. 30. The nation’s third-largest health insurer by revenue handily beat Wall Street estimates for the quarter. Chief Financial Officer Shawn M. Guertin cited “solid performance” in the company’s core health insurance business that offset “pressure” from its business under the Affordable Care Act.

“Pressure” here refers to the fact that, while Aetna has reaped an ACA windfall, it can’t make money insuring the sicker and costlier undesirables who are desperately trying to access affordable care by seeking coverage on the ACA exchanges.

Aetna’s earnings report came a week after UnitedHealth reported a 12 percent jump in revenue to $46.3 billion for the three months that ended Sept. 30 compared with the same period the previous year. The company collected $36.1 billion in insurance premiums, a sum 11 percent higher than for the year-ago quarter, while profits increased 29 percent to $1.98 billion as the company signed up 955,000 more health insurance customers through its employer and individual plans. (Anthem, Cigna and Humana will report their latest quarterly earnings next week.)



..............SNIP"

[lumberjack_jeff]

1. On significant problem with the ACA are perverse incentives.

Under the ACA, insurance companies loss ratio must be at least 80%, meaning that they can only spend 20% of revenues on profit and overhead.

How do you get around this? How do you increase revenues? If one assumes that they can't do the same stuff with less staff (that they're already as efficient as they know how to be), the only other way to increase profits is to increase medical losses, and the easiest way is to allow medical providers to charge more for their services.

When hospitals charge more, the insurance company can pocket more profit.

[applegrove]

2. That is bad.

[Wilms]

3. This was always a perverse incentive, I would have thought.

Single payer would solve that...and then some.

[lumberjack_jeff]

5. No and yes.

Single payer would solve that, but prior to ACA insurance companies drove up their profits by negotiating cheap prices with providers. With the capped medical loss ratio in place, it's less clear.

[Wilms]

6. Thank you, Jack. n/t

[Hoyt]

4. The loss ratio is 15% for large plans. In any event, they are in competition with not-for-profits,

Co-ops, ERISA plans, other insurers, etc. So, they aren't going to try to artificially increase premiums. The real way to make more profits is to attract more insureds by offering a better plan to employers.

The problems with our health system go much deeper than insurance companies. If you got rid of them, we'd save maybe 7% or so if lucky. That's a 7% worth saving, but we aren't going to stop griping because our premium goes from $600 a month to $550.

[lumberjack_jeff]

7. In many states, there is only one provider in the exchange.

In that case, there's only one way to raise profits - raise provider reimbursement.

And not-for-profit is meaningless. Premera Blue Cross is still subject to the 15% loss ratio, so cost inflation is the only path to increased revenue for its CEO (the latest salary information I can find is $2.2 million).

[Hoyt]

8. Yes, because the others can't make enough for the risk. If the remaining plan jacks up rates

others will enter market. Insurance companies have done a lot of ugly things, but they aren't going to pay providers more than they have to.