US health insurers: in rude health


The coronavirus is devastating hospitals across the US. Healthcare facilities cancel non-emergency surgeries to free up beds for Covid-19 patients. At the same time people postpone routine medical appointments and avoid ER visits to escape exposure to the virus. This has left hospitals haemorrhaging money — to the tune of $50bn a month according to one industry study.

But amid the financial fallout, one sector in the $3.6tn-a-year US health industrial complex is doing just fine. For America’s private insurers, all the delayed and forgone care adds up to plenty of savings. They have fewer claims to pay these days, even as premiums continue to flow in. 

The country’s biggest listed health insurers — UnitedHealth Group, Cigna, Anthem and Humana — have collectively added about $160.5bn to their market values since the pandemic began in earnest in late March. Expectations of bumper second-quarter earnings have lifted share prices in both UnitedHealth and Humana towards record highs.

UnitedHealth, which reports on Wednesday, should rake in $5bn of net income on $63.5bn of revenues for the June quarter, according to consensus estimates compiled by Refinitiv. While its top line will climb just 5 per cent year on year, profits will surge 44 per cent. Much of this gain will be driven by the fall in the medical-loss ratio. This measures how much of the premiums an insurer collects gets paid out to medical providers. It should fall across the industry by an average of 510bp to 79.3 per cent, according to Credit Suisse.

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How long the good times will last is anyone’s guess. Not everyone will rush for treatment when the crisis subsides. But people will not put off that hip replacement forever. High unemployment could mean less premiums for insurers down the line.

The fact that health insurers benefit in the middle of a pandemic while hospitals are on the brink of financial ruin is food for thought. If anything, it underscores the perverse incentives in America’s privatised healthcare system. UnitedHealth’s shareholders may love that it spent $1.7bn during the first quarter on share buybacks. But policymakers may soon find other ideas for the profit bounty of health insurers instead.

Should US health insurers share their windfall gains with hospitals? Or are these insurers and their shareholders entitled to any good business that comes their way? The Lex team is interested in hearing more from readers. Please tell us what you think in the comments section below.



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