August 29, 2020 With many fewer people going to doctors for check-ups, screenings, and elective surgery (the big money-maker for hospitals). it’s flush times for the corporados. JAMA today posted “Unexpected Health Insurance Profits and the COVID-19 Crisis” a diplomatically worded exposé. Joshua Sharfstein, MD and colleagues report:
The coronavirus disease 2019 (COVID-19) pandemic has placed unprecedented financial stress on most of the US health care system, including physician practices, emergency medical service systems, and hospitals. But there is one notable exception: health insurance companies. Sharp declines in elective care during the pandemic have reduced health care expenditures and contributed to earnings that are twice as large as those earned last year. For example, the UnitedHealth Group’s net income during the second quarter grew from $3.4 billion in 2019 to $6.7 billion in 2020 and Anthem Inc’s net income increased from $1.1 billion to $2.3 billion.
Under the law, insurers must return a large portion of these excess revenues back to individuals, families, and employers. Insurers can keep only 15% or 20% of premiums for administration and profit; if they fail to spend the remainder on health services and efforts to improve quality, they must rebate the difference.
This process, however, was designed to account for modest annual variation and not precipitous drops in expenditures, and it moves slowly. Funds returned to families and employers this year are based off unspent funds from 2017 to 2019. Accordingly, reductions in medical spending from 2020 will not be fully rebated until 2023.
There is a better option for this unprecedented situation. Amid a national crisis, the unspent premiums generating these windfalls represent an opportunity to urgently fight the pandemic, as well as buffer the economic shock of the recession today.
Thus far, insurers have handled their financial good fortune in a variety of ways. Some have advanced funding or loaned money to health care organizations. Others have pursued stock buybacks, which can create wealth for shareholders. A few are following the lead of auto insurance companies and are offering early rebates to enrollees, with encouragement by the US Department of Health and Human Services.
The villain pointed to in the link is Aflac. (The pushy duck is a skip chaser working for his Uncle Scrooge.) Other companies are like bookies, raking in the vig… The paper by Sharfstein et al is rich in links and worth checking out. Too bad we can’t have Medicare for All.