Big Insurance revenues and profits have increased by 300% and 287%, respectively, since 2012 due to explosive growth in the companies’ pharmacy benefit management (PBM) businesses and the Medicare replacement plans they call Medicare Advantage. The for-profits now control over 80% of the national PBM market and over 70% of the Medicare Advantage market.
Healthcare in the US is too damn profitable. In 2022, Big Insurance revenues reached $1.25 trillion, and profits soared to $69.3 billion. That’s a 300% increase in revenue and a 287% increase in profits from 2012 when revenue was $412.9 billion and profits were $24 billion.
What happened?
What has changed dramatically over the decade is that the big insurers are now getting far more of their revenues from the pharmaceutical supply chain and taxpayers as they have moved aggressively into government programs. This is especially true of Humana, Centene, and Molina, which now get 85%, 88%, and 94% of their health-plan revenues from government programs.
Big Insurance continues to make substantial amounts of money selling policies and services in what they refer to as their commercial businesses – to individuals, families, and employers – but the seven companies’ commercial revenue grew just 260%, or $176 billion, over ten years (from $110.4 billion to $287.1 billion). While that’s significant, profitable growth in the commercial sector has become a major challenge for big insurers – so much so that Humana just last week announced it is exiting the employer-sponsored health insurance marketplace entirely.
The average premium for an employer-sponsored family plan – not including out-of-pocket requirements – was $22,463 in 2022, up 43% since 2012, contributing to the decades-long decline in the percentage of U.S. employers offering coverage to their workers. The percentage of U.S. employers providing health benefits to their workers dropped from 69% to 51% between 1999 and 2022 – including a dramatic 8% decrease last year alone. Growth in this category is primarily the result of insurers “stealing market share” from each other or more minor competitors. Due to this segment’s relative stagnation, PBMs, and government programs have become the new cash cows for Big Insurance.
As Congress gets ready to investigate PBMs, the profit growth at the three companies over the past decade was even more dramatic than revenue growth. Their PBM profits increased 438%, from $6.3 billion in 2012 to $27.6 billion in 2022.
If that isn’t bad enough, the Big Seven spent $26.2 billion last year buying back their stock to boost the value of shares, a once-illegal practice that benefits no one other than already-rich shareholders.
Medicare Disadvantage
Unlike ads for prescription drugs, insurance companies are not required by law to mention the side effects on patients. Still, Americans deserve to know about the many disadvantages of Medicare Advantage. For example, unlike actual Medicare, doctors must often get the insurer’s approval before treating their Medicare Advantage patients. Additionally, these private plans often need more networks of doctors, hospitals, and other essential facilities. This starkly contrasts to actual Medicare, where nearly all doctors and hospitals are available to patients without a referral.
It gets worse. In Medicare Advantage plans, if a patient knowingly or inadvertently sees a doctor or goes to a hospital out of network, they could be on the hook for thousands of dollars out of their pocket. And these private plans’ networks typically cover only the patient’s home area, meaning doctors and hospitals, including centers of excellence, outside the patient’s home area are considered out of network. Adding insult to injury, unlike traditional Medicare enrollees, people enrolled in Medicare Advantage plans cannot buy supplemental coverage to help cover out-of-pocket expenses. This means they could pay as much as $7,500 out-of-pocket a year.
The New York Times recently reported, “Eight of the ten largest ten biggest Medicare Advantage insurers—representing more than two-thirds of the market—have submitted inflated bills, according to the federal audits. And four of the five largest players—UnitedHealth, Humana, Elevance, and Kaiser—have faced federal lawsuits alleging that efforts to overdiagnose their customers crossed the line into fraud.”
The healthcare market is confusing for consumers, and misleading branding like private Medicare Advantage plans makes it worse. But Congress has the chance to stand up for seniors with the Save Medicare Act. It will end this scam by renaming so-called “Medicare Advantage” plans, prohibiting private insurers from using the word “Medicare” in plan titles or advertisements, and imposing significant fines for any insurer that engages in this deceptive practice. The Medicare enrollment season should not be a confusing and misleading minefield for our nation’s seniors and others who depend on this essential program. Congress can and should pass the Save Medicare Act to end the Medicare Advantage scam and prevent any efforts to privatize Medicare. For our nation’s seniors and taxpayers, it’s the right thing to do.
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