Insurers Profit from Health Law

January 11th, 2012
in econ_news

health_insurance_logo1Econintersect:  Health insurance providers have seen revenues, margins and earnings surge as a result of the Patient Protection and Affordable Care Act of 2010 (“Obamacare”).  Some of the comparisons:

  • Average operating profit margins expand to 8.24 percent in the six quarters since the overhaul became law, compared with 6.88 percent for the 18 months before it was passed;
  • Quarterly earnings per share from continuing operations between the third quarters of 2008 and 2011 increased 29%;
  • Medicare derived revenue increased by 1/3; and
  • Medicaid revenue doubled.   

The companies studied were WellPoint Inc. (WLP), UnitedHealth Group Inc. (UNH), Aetna Inc. (AET), Humana Inc. (HUM), and Cigna Corp. (CI).  (From Bloomberg.)

Follow up:

Health insurers lobbied vigorously against the healthcare bill before it was passed but so far the sector seems to have benefited.  From Bloomberg:

Insurers led by WellPoint Inc. (WLP), the biggest by membership, recorded their highest combined quarterly net income of the past decade after the law was signed in 2010, said Peter Gosselin, the study author and senior health-care analyst for Bloomberg Government. The Standard & Poor’s 500 Managed Health-Care Index rose 36 percent in the period, four times more than the S&P 500.

“The industry that was the loudest, most persistent critic of this law, the industry whose analysts and executives predicted it would suffer immensely because of the law, has thrived,” Gosselin said. “There is a shift to government work under way that is going to represent a fundamental change in their business model.”

Health insurers contributed $86.2 million to the U.S. Chamber of Commerce to oppose the law after Obama administration officials criticized the plans for enriching themselves by raising customer premiums.

However, the healthcare insurance industry lobby is still opposed to the law, as indicated by this from Bloomberg:

“We remain very concerned that major health-care reform provisions that go into effect on Jan. 1, 2014 will raise costs and disrupt coverage for individuals, families, seniors and small businesses,” Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington lobbyist, said after reading the study.

The future of the law is still in doubt as the Supreme Court will hear arguments about the constitutionality of the law in March.  See GEI News.

Sources:  Financial Advisor Magazine, Bloomberg and GEI News

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1 comment

  1. MilesCFA says :

    My family health insurance was $485/mn prior to Obama entering office. It's now $1175/mn. Gee, I wonder why the insurers are doing so well?

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