Read the headlines these days and you’d think the health insurance companies are going broke. It’s true most insurers offering Obamacare are losing money on it. UnitedHealth Group, the nation’s largest insurer, announced it will all but exit Obamacare next year because of those loses. But insurance companies have not fallen on hard times. Anything but.
Obamacare may be a bust, but the overall portfolios for most insurers, all those products offered outside the Obamacare exchanges, have earned staggering profits under Obamacare. Look at insurers’ stock prices. On March 23, 2010, the day President Obama signed the Affordable Care Act, UnitedHealth traded at $30.40 a share. Today, it’s $133. UnitedHealth is not alone. In January, the Center for Public Integrity noted: “Health Net’s share price has increased 224 percent [under Obamacare]… Anthem is up 238 percent… Aetna’s 290 percent. Cigna’s 305 percent. And Humana’s 309 percent.” How have insurers done it? By increasing deductibles, hiking premiums, and slashing coverage for medical services and drugs, especially specialty drugs.
In this rapidly changing business, one area of concern among some industry observers is drug reimbursement. To fathom the reimbursement system you have to understand how fees are determined. First, a drug must be placed on a formulary, a list of prescription medicines covered by insurance companies. Formularies may vary from one health plan to another, but if a drug is not on a formulary the consumer must pay for it out-of-pocket, often at 100 percent of the cost. Being profit-driven, insurers want to maximize the number of drugs excluded from formularies. For those drugs that do make it, the formulary establishes the amount that is paid in reimbursement.