How Big Insurance Got So Big

Since 2014, the seven largest for-profit insurers have taken in over $10 trillion in revenue — much of it from taxpayer-funded programs and health care businesses they now own outright.

Almost sixteen years ago to the day, when Congress was debating what would become the Affordable Care Act, I warned lawmakers during a House hearing that if they acquiesced to the demands of the health insurance industry, they might as well call their bill the “Health Insurance Industry Profit Protection and Enhancement Act.”

Ultimately, members of Congress felt they had no alternative but to cave to the industry’s pressure. Most notably, it stripped out a provision that would have created a Medicare-like “public option” to compete with Big Insurance, which President Obama had once said was necessary “to keep insurers honest.”

Reflecting on the industry’s victory six years later in a commentary for the Center for Public Integrity, I wrote that when lawmakers killed the public option, they “threw consumers to the insurance wolves.”

And in doing so, as shown by a review of the cumulative earnings of the biggest insurers since the law went into full effect in 2014, lawmakers did indeed protect and enhance their profits. And in many ways, the wolves are running the U.S. health care system.

What I found in my review was that between 2014 and 2024, the seven largest for-profit insurers alone reported making more than half a trillion dollars in profits on revenues of more than $10 trillion. And one company – UnitedHealth Group – has made nearly as much in profits as the other six combined, largely by taking advantage of the ACA’s shortcomings and by gaming the Medicare Advantage program.

All of those companies were fairly big when I was an industry executive, and I knew they had grown like weeds since I walked away from my corporate career in 2008, but even I was surprised to see just how fast they’ve ballooned through consolidation and their strategies of revenue maximization – and by venturing so far from health insurance that we need a new name to describe what these behemoths have become. That growth likely would have been restrained if they had had to deal with a new competitor not beholden to Wall Street – and if they had not figured out how to turn other well-intended provisions of the ACA and the Medicare Modernization Act of 2003 that were drafted to protect consumers to their advantage.

As you will see by the charts below, it is clear that in many respects those companies’ growth strategies took shape in response to provisions of the ACA and other federal laws – including that 2003 law, which created the Medicare Advantage program – that were enacted with good intentions to reform or outright ban some of business practices insurers had put in place that intentionally penalized all but the wealthiest and healthiest among us.

Big Insurance revenues from premiums, state and federal taxpayers, the prescription drug business and a broad range of health care delivery operations between 2014 and 2024.

The Affordable Care Act was passed in 2010, but most of the provisions of the law, which sought to reduce the number of uninsured and underinsured Americans by outlawing some of the most egregious of those business practices, didn’t go into effect until 2014. So I used that year as a starting point to see how those seven companies have fared since then. I looked at dozens of annual reports, made a bunch of spreadsheets, crunched a lot of numbers and turned all that over to my colleague Joey Rettino to make the graphs.

Big Insurance earnings from operations (profits) between 2014 and 2024.

One reason for starting with 2014 was because that was the year out-of-pocket expenses for in-network care was finally capped (although I would argue that lawmakers also caved to intense industry lobbying by setting the cap, which goes up every year, way too high from the start. In addition, the ACA did not establish a cap for out-of-network care. So while the law reduced the number of uninsured Americans by several million, it led to millions more becoming underinsured. Forbes magazine famously called those people “functionally uninsured” because of all the money they have to pay out of their own pockets before their coverage kicks in – money many Americans simply do not have. And you can be sure that both the number of functionally uninsured Americans will go up next year when the out-of-pocket max for a family policy will rise to $21,200.

I don’t want to give the impression that the ACA did not do a world of good for so many of us. Among other things, it made it unlawful for insurers to refuse to sell coverage to people with pre-existing conditions or to change them more because of their health status. And insurers can no longer cancel your policy when you get sick, as many did routinely before the ACA. Some even paid employees bonuses for rescinding policies of women who had just been diagnosed with breast cancer.

But in many ways, the ACA was a godsend for the health insurance business. Enrollment in private health insurance plans had stagnated by 2010 as insurers had raised premiums to the point that they were unaffordable for most people who didn’t get their coverage through an employer. And providing subsidized coverage for workers was becoming increasingly unaffordable for many American businesses. The percentage of employers that could afford to offer subsidized coverage to their workers declined steadily in the 1990s and 2000s (and continues to decline). The main way big insurers were able to increase enrollment in their health plans pre-ACA was largely by “stealing market share” from each other or from smaller competitors – or by buying or merging with their competitors.

Nearly 50 million people were uninsured when the ACA was passed because of the cost of coverage and the fact that many insurers routinely refused to sell policies to a third or more of applicants in the individual market because of their pre-existing conditions – even for conditions like acne. Insurers did not want to grow by selling coverage to people who likely would actually have to use it, so they made premiums for people with preexisting conditions unaffordable, and in many cases refused to sell them coverage at any price. To do otherwise would have led to unprofitable growth, and Wall Street wouldn’t put up with that.

To make coverage more available and affordable – even for people with preexisting conditions – the ACA made more low-income Americans eligible for Medicaid and authorized the federal government to help people of modest means pay for their coverage through subsidies (more accurately, through tax credits). At last count, 24 million of us are currently enrolled in ACA-established marketplace plans, and most receive subsidies. Or, to be more precise, their insurers do. Billions of dollars in federal subsidies have flowed to insurance companies since 2014 – largely to the big for-profit insurers – helping them meet Wall Street’s profit expectations.

Another well-intentioned part of the law that was supposed to constrain insurers’ profits – the medical-loss ratio (MLR) provision that requires insurers to spend 80-85% of premiums on their health plan enrollees’ care – has instead created a perverse incentive for big insurers to get even bigger by buying up thousands of physician practices and other parts of the U.S. health care delivery system, as HEALTH CARE un-covered has reported. Because health care delivery is not subject to the MLR requirement, insurers quickly figured out that they could circumvent the intent of the law by steering their health plan members to the health care delivery operations they buy – and paying the health care providers they own considerably more than what they pay independent physician practices and facilities.

UnitedHealth is in a league of its own in working the ACA to its advantage. That company has created or bought nearly 2,700 health care businesses in recent years, the vast majority of which are in health care delivery. And as researchers reported just this week in Health Affairs, UnitedHealth’s Optum division pays the physician practices it owns an average of 17% more than it pays independent practices – and 61% more in parts of the country where UnitedHealth has a dominant market share.

“Insurers” like UnitedHealth, Cigna (where I used to work) and CVS Health (which bought Aetna in 2018) embarked on or accelerated their vertical integration strategies after the ACA in another way: by becoming giant middlemen in the pharmacy supply chain. Their PBMs now control 80% of the lucrative middle between you and the makers of the medications you take. Elevance, which operates Blue Cross plans in many states under the Anthem banner, also has its own PBM. Altogether, these PBMs now contribute hundreds of billions of dollars to their owners’ revenues every year. Those same companies also operate either retail pharmacies or mail-order drug businesses or both – all of which are exempt from the MLR rules established by the ACA.

The three smaller of the seven – Humana, Centene and Molina – have also diversified into health care delivery in one way or another – and they get almost all of their health plan revenues from the Medicare and Medicaid programs. Or, in other words, from taxpayers.

I’ve often said that the one thing these big companies know how to do is make money. The seven biggest for-profit insurers have thrived in ways they likely wouldn’t have had it not been for the ACA and the Medicare Advantage program and for the willingness of state and federal regulators to essentially rubber-stamp the vast majority of their acquisitions over the years.

There is another thing, though, that they (through their armies of lawyers and lobbyists) excel at: Turning laws meant to rein in their profits into vehicles to take profiteering to new heights. Insurers and their allies spent hundreds of millions of dollars in 2009 and 2010 trying to keep the ACA from becoming law, but it has turned out to be one of the best things that ever happened to them – and their investors.