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A senior picks up his drug prescription. Photo: Joe Raedle/Getty Images

The 3 big health insurers that control a majority of Medicare's prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration's plan to eliminate rebates within Medicare.

The big picture: These companies rely heavily on rebates to offset the costs of covering seniors' prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.

By the numbers: Axios analyzed the Medicare businesses within the companies' 2018 filings with state insurance commissioners.

  • UnitedHealthcare paid $7.3 billion in prescription drug claims and received $4.1 billion in rebates, according to its major subsidiary in Connecticut.
  • Humana paid $7.1 billion in prescription drug claims and received $3.9 billion in rebates, according to its major subsidiary in Wisconsin.
  • CVS paid $6.3 billion in prescription drug claims and received $3.5 billion in rebates, according to its SilverScript subsidiary.

Between the lines: Those rebates offset more than half of what these 3 companies had to pay for people's prescriptions.

  • That's well above the average for all Medicare drug plans, which was just 25% in 2018 (Table IV.B8).
  • Plans don't keep Medicare rebates as profit, and instead pass them back to the federal government. (They do, however, keep a small percentage of rebates from their commercial plans.)
  • The companies did not respond to requests for comment.

The bottom line: CVS, Humana and UnitedHealth — all of which vehemently oppose Trump's proposed rebate rule — are "overly dependent on rebates to keep premiums low [so they can] buy market share, which is what these guys have been doing for the past decade," said Emily Evans, a health care managing director at investment research firm Hedgeye.

  • If those rebates go away, sooner or later the big 3 would have to raise monthly premiums to avoid losses.
  • And hiking drug plan premiums could persuade seniors to switch to competing plans that don't rely on rebates and therefore won't need to raise their premiums as much.

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