Healthcare premiums, profits up…so what gives?

BTN11: Healthcare premiums, profits up...so what gives?

MINNEAPOLIS - Twenty-three percent.

That's how much profits went up at UnitedHealth Group in the third quarter over last year.

Good news for them and shareholders, but what about everybody else?

Healthcare premiums will go up next year about six percent for most big U.S. employers, according to the National Business Group on Health. That’s higher than inflation and higher than average wage increases.

But for individual plans in the marketplace a.k.a. MNsure a.k.a. Obamacare, here are a few average increases for next year:

  • North Carolina – up 24 percent
  • Pennsylvania – up 32 percent
  • Maine – up 25 percent
  • Minnesota – up to 67 percent increase

So if people are paying more, why is United Health making more?

For the nation's largest health insurer, revenue is up (12%), profits are up (23%), share price is up (22%).

“It's question that gets asked a lot, and I think part of it is that there's a public perception that healthcare is this critical need and it's done on a charity basis, and the reality is that it's actually a fairly big economy,” said Steve Parente, the Minnesota Insurance Industry Chair of Health Finance and director of the University of Minnesota Medical Industry Leadership Institute.

As he explains it, the perception is false. It's not like United drives up premiums and then laughs its way to the bank.

United doesn't even offer plans in MNsure, and in the plans it does offer in the Affordable Care Act market elsewhere, United claims it will lose about $850 million this year alone.

So is it fair to blame United for that? No.

“It's really just a question of a new market, a very regulated experiment not quite working out as well as really the federal government intended to,” said Parente.

So where's the profit coming from?

According to United, those margins are in employer-insurance plans, Medicare and Medicaid expansion, and its Optum sector that provides pharmacy benefits management and runs doctors' offices.

“They are doing sound business. They are investing for the future. They are not just an insurance company, they are a technology company and they are truly committed to try to make health care better, but it's not a cheap endeavor,” said Parente.


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