Trump Helps Health Insurers Swell Their Profits
Few industries have escaped the squeeze of the coronavirus crisis. That’s true of obvious sectors like restaurants and hotels, of places where mandatory shutdowns have led to mass layoffs, as well as of reopened regions where supply now exists but demand still doesn’t. It’s also true of industries where demand remains high, like health care. Hospitals, of course, have been strained to a breaking point treating coronavirus patients, necessitating federal bailout money, though the decline in elective procedures has been so drastic that it alone has accounted for a 2.25 percent drop in quarterly GDP, nearly half of the total quarterly decline, according to figures released Wednesday. That’s bad news for providers and insurance companies alike.
The nation’s largest health insurers have responded by accelerating their customary practice of squeezing their payouts. UnitedHealthcare, along with other insurance giants including Aetna and Cigna, have pushed for significant pay cuts for doctors. Specialists, physicians, emergency room employees, and even nurses and technicians treating COVID-19 patients have seen salaries slashed in recent weeks. Meanwhile, those same insurers have severed contracts with anesthesiology and neonatal care providers, also in the name of cost-cutting. A recent survey by the American Society of Anesthesiologists found that 42 percent of anesthesiologists had contracts terminated in the previous six months, while 43 percent of respondents experienced payment rate cuts from insurers of as much as 60 percent.
With such aggressive rate-cutting, one might think that UnitedHealth and its peers have sustained substantial losses to their extremely profitable businesses as well; indeed, according to estimates, coronavirus will cost insurance companies tens if not hundreds of billions of dollars in additional expenses. But so far, that’s not the case. In fact, on an earnings call last week, UnitedHealth Group, the country’s largest insurer, announced that profits from operations rose 3.4 percent to $5 billion in the first quarter, making this one of its most profitable quarters this decade, though down slightly from its all-time-high pre-coronavirus mark. Its revenues rose by nearly 7 percent to $64.4 billion. The company even found enough money lying around to continue buying back its own stock. This, of course, while millions of Americans lost their employer-provided health insurance due to mass layoffs. Meanwhile, the company just reported that its CEO, David Wichmann, received a 233 percent pay raise over the year prior: In 2019, he made more than $52 million, while Executive Chair Stephen Hemsley took home over $50 million himself.
There’s even reason to believe that these insurance companies expect the crisis to benefit them even more. According to documents reviewed by the Prospect, Wall Street investment firms are under the impression that the Trump administration will waive the medical loss ratio (MLR) requirement on insurers this year, which could allow the companies to pocket an unprecedented windfall of profits beyond what they made in that record-setting first quarter. Bearing such glad tidings, investment firms are telling their clients to buy health insurance stocks—one reason why those stocks have soared in the past two months.
Read more: https://prospect.org/health/trump-helps-health-insurers-swell-their-profits/
(American Prospect)
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