May 24, 2017

Profits are booming at health insurance companies

The largest health insurance companies in the United States reaped historically large profits in the first quarter of this year, despite all the noise surrounding the Affordable Care Act's individual marketplaces.

Aetna, Anthem, Cigna, Humana and UnitedHealth Group — the big five for-profit insurers — cumulatively collected $4.5 billion in net earnings in the first three months of 2017. That was by far the biggest first-quarter haul for the group since the ACA exchanges went live in 2014. Other major insurers, such as the Blue Cross and Blue Shield company Health Care Service Corp., also are improving their ACA operations.

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Aetna lost money because it had to pay Humana a $1 billion break-up fee after their merger failed; otherwise it would have been in the black. Some other things to keep in mind:

  • The ACA exchanges represent a small amount of the insurance market, and most of the for-profit carriers have bailed on those plans.
  • Employer-based coverage is a profit center, but insurers continue to invest more in Medicare Advantage and Medicaid.
  • Congress suspended the ACA's health insurance industry fee for 2017, which is creating a temporary windfall.
  • The first quarter of the year is usually good for health insurers. Deductibles are reset, leaving people on the hook for a lot of their out-of-pocket medical expenses. The fourth quarter usually is the worst, since people often reach their deductibles by the end of the year.

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