There’s no question that the insurance companies’ profits have been enormous. The question is, was Obamacare the cash cow?
Based on the the companies’ filings and the analysis of people on Wall Street, at universities and a respected neutral health policy group, the answer is, no.
The White House press office pointed to a news article that reported booming profits for the top five for-profit insurance companies, Aetna, Anthem, Cigna, Humana and UnitedHealth Group. Collectively, they had $4.5 billion in net earnings in the first three months of 2017.
That cash was”the biggest first-quarter haul for the group since the Affordable Care Act exchanges went live in 2014,” the article said.
But the article doesn’t actually tie those profits to Obamacare.
Obamacare does not just include the exchanges where people buy private insurance. The exchanges themselves are a small slice of the overall insurance business.
Despite the enormous attention paid to the exchanges, they make up less than 4 percent of the insurance market for people under 65. And contrary to Trump's assertion, they have dragged profits down, not boosted them up, experts say.
Returns from the exchanges have been so bad, three out of five of the companies listed in the article, Aetna, UnitedHealth and Cigna, have fled.
For 2018, Anthem withdrew from Ohio, Indiana and Wisconsin, and trimmed back the number of counties it serves in Kentucky, Georgia and California. It was going to leave Virginia completely, but then struck a deal with the state to sell in counties that would otherwise have no carrier.
Moody's Investor Service ranked it as a positive development for companies that exited the exchanges, saying it "lowered exposure to this challenging business."
So Trump missed the target completely when he linked the exchanges and the multibillion-dollar profits of five big insurance companies. But Obamacare is much more than the exchanges and parts of the program have both helped and hindered company profits.
On the negative side of the ledger, the Affordable Care Act imposed limits on the spread between premiums collected and medical services paid out. For individual and small group plans, companies must spend at least 80 percent of premiums on providing care. For the large-group plans, the percent is 85 percent.
“This provision has likely had a modest downward effect on profits,” said Larry Levitt with the Kaiser Family Foundation.
On the positive side of the ledger, the one clear bright spot for insurers in Obamacare was the expansion of Medicaid. In the 32 states that extended the program to adults making as much as 138 percent of federal poverty, coverage is mainly handled through private insurers.
So, where did those hefty profits for insurance companies come from?
The bulk of the business lies in employer-based coverage, which accounts for nearly 60 percent of the under-65 insurance market. Over the years, companies have benefited by shifting more of the costs onto customers through higher deductibles and other out-of-pocket expenses.
Mergers in the industry have also helped.
Medicare Advantage, a quasi-private version of traditional Medicare, has also been a key profit center for insurers. Under the program, the government contracts with insurance companies to deliver health care to seniors. The rising number of retirements among baby boomers has fueled that market. Enrollments are up, and the insurance companies have worked hard to keep their costs down.
Our ruling
Trump said insurance companies have made a fortune with Obamacare. The White House cited the companies’ surging profits as proof.
Every report we saw and every expert we reached said insurers made their huge profits elsewhere, largely through their work in the large group or employer-based market or through the Medicare Advantage program. The expansion of Medicaid, another part of Obamacare also helped, but to a smaller degree.
We rate this claim False.
Insurance companies “have made a fortune with Obamacare.”
— President Donald Trump on Wednesday, Oct. 18, 2017 in a tweet
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