Obamacare Boosts Insurance Company Profits

Obamacare Boosts Insurance Company Profits April 23, 2015

A few years ago I had the privilege of spending a weekend at the Rockefeller estate at a small conference with Wendell Potter, the former insurance company executive who left and began to reveal the inner workings of how that industry works. He writes that Obamacare has increased insurance company profits.

But despite the worry, it turns out that the law that the insurance industry’s shills demonized has been awfully good to insurance-company investors.

Here’s how IBD’s Vance Cariaga reported UnitedHealth Group’s report on its first-quarter-2015 earnings last Thursday:

UnitedHealth Group delivered its best quarter in years Thursday as it benefited from new Obamacare customers, another strong Optum-platform showing and tame medical expenses. The nation’s No. 1 health insurer also raised its full-year 2015 sales and earnings guidance.

(Optum is a fast-growing division of the company that provides data and other services to its health-plan division, as well as to employers and other insurers.)

UnitedHealth Group’s revenues grew an eye-popping 13 percent, from $31.7 billion in the first quarter of 2014 to $35.8 billion in the first quarter of 2015. Net earnings on a per-share basis were even more impressive, growing 33 percent, from $1.10 to $1.46 per share.

One reasons for the glowing results was the fact that UnitedHealth added 570,000 new customers during the first quarter of 2015 from the Obamacare exchanges. And contrary to conventional wisdom, that the formerly uninsured Obamacare customers would overuse medical services, UnitedHealth executives said that wasn’t the case.

All of this was predictable. Indeed, I predicted it. Once the public option was dropped from the original bill, all that was left (other than the expansion of Medicaid) was government subsidies helping individuals purchase health insurance. That was the payoff for insurance companies to accept the ban on rejecting customers due to preexisting conditions and other similar changes. That meant millions and millions of new customers, most of them subsidized to be able to afford it. There was really no way that would not increase the profits of the insurance companies.

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