In a country where the healthcare industry is driven by profit, it’s no surprise that health insurance companies lead the charge and prioritize their bottom line over the well-being of the very patients they claim to serve. The result? A system rife with inefficiencies, soaring costs, and compromised care.

It thus makes sense that according to an AP-NORC Center for Public Affairs poll, just 12% (!) of the American public believes the healthcare system operates “extremely” or “very” well.

The system is broken, and I believe our health insurance system is largely to blame.

Profit Drivers

In its first-quarter 2023 earnings announcement, Cigna Group revealed an uptick in key financial metrics and showcased a 6% year-over-year increase in total revenue (a whopping $46.5 billion) — all while hospitals and providers grapple with inflation, staffing woes, and reimbursement challenges. Yet, Cigna is not alone; UnitedHealthcare posted a $20.1 billion profit in 2022, and Aetna had a boom year of its own.

Now for some perspective. Back in May, Sen. Bernie Sanders’ (I-Vt.) proposed $15 billion plan to support the healthcare workforce was described as a “bold” plan. Keep in mind, this number is dwarfed by UnitedHealthcare’s 2022 profits, and the combined revenue of the top five American health insurance companies rises above the GDP of more than 160 countries. The numbers are truly sobering.

High Costs, Worse Outcomes

U.S. insurance giants have not found a way to improve the overall health of the nation, even with expanded coverage to combat rising patient costs. One Commonwealth Fund study found the U.S. spends significantly more on healthcare than other developed countries yet has poorer health outcomes, raising concerns about the effectiveness of the current system. Zooming out, Cigna, UnitedHealthcare, Aetna, Humana, and Elevance all simply rinse and repeat their quarterly profitability as the reports roll in.

Profitability, however, is buttressed by a highly favorable regulatory environment for the health insurers. Layered (and strong) vertical integration strategies tie together these companies’ PBMs, providers, and insurance networks. Furthermore, they enjoy extensive cost mitigation strategies thanks, in part, to the No Surprises Act and care denied through prior authorizations. Overall, the regulatory environment has seemingly fallen asleep at the wheel while looking to control the flow of finances from patients and providers into payers’ coffers.

Yet, regulatory somnolence is not solely to blame; questionable payer behaviors in the absence of timely (or any!) ramifications also looms large.

Questionable Private Payer Conduct

First and foremost, health insurance companies employ prior authorizations as one insidious tactic: requiring physicians to obtain insurer approval before providing specific treatments.

This creates a headache-inducing system and can influence long-term physician behaviors, spawning psychological barriers to providing care by inflicting operational and financial losses on practices. Per the American Medical Association, prior authorizations require 2 workdays per week as burnout-inducing, uncompensated administrative work.

In fact, one ProPublica report found that over a period of 2 months, Cigna denied over 300,000 claims using algorithms to review each case in just 1.2 seconds (on average). The Senate recently decided to investigate these denial and pre-authorization tactics, and while the Centers for Medicare & Medicaid Services (CMS) proposed a new rule to help in this respect, it’s simply not enough; Congress must step in.

Underpayments and Jury Awards

Beyond the aforementioned tactics, one of the simplest methods to retain revenues and turn a profit is to simply deny provider payments. In 2023, UnitedHealthcare lost an arbitration totaling $91.2 million with Envision for underpaying in a single year. This is not an isolated case.

Another jury awarded Team Health $62 million in a lawsuit with UnitedHealthcare in 2021. Why? Underpayments. When hit with a class action lawsuit accusing the insurance titan of shirking its contractual responsibilities by neglecting to apply due discounts for medical services, Cigna contended the result was delayed and/or under-payments. See a pattern?

Providers negotiate reimbursement rates with health insurers for patient services rendered; providers treat the insured patient; the insurer refuses to pay (or underpays) and holds onto and invests the capital; provider groups have already shelled out cash for care provided, with a lawsuit as the only recourse; providers sue; years pass; a jury awards payment to the provider group, but the damage is already done.

While $61 and $91 million sound like massive sums of money, this is merely budget dust for an insurance giant. The loss of revenue alongside continued expenses, however, is financially devastating for providers and patients.

Mega-Mergers: Vertically Integrated Monopolies

Meanwhile, the rising trend of vertical integration in the healthcare insurance industry creates a complex web of interwoven relationships between insurance companies, retail establishments, pharmacy benefit managers (PBMs), provider groups, and pharmacies. Just look at CVS Health: at a high level, CVS controls the retail pharmacy, Aetna, Minute Clinics, Oak Street Health (primary care clinics), and Caremark (PBM). The other major carriers are no different.

As these entities merge, the healthcare landscape becomes increasingly monopolistic: often to the detriment of patients and providers. Unchecked growth prompts reduced competition, increased barriers to entry, and a lack of transparency in pricing and decision-making. Consequently, patients and employers often face higher out-of-pocket expenses, limited choices, and compromised quality of care (while providers struggle with diminished bargaining power and autonomy). Industry consolidation also raises urgent concerns about long-term implications for patient access, affordability, and healthcare quality.

The Giant Medical Loss Ratio Loophole

Under the Affordable Care Act’s medical loss ratio (MLR) mandate, insurers must allocate 80-85% of their revenue to medical services. While this may sound reasonable, the law created a subsequent loophole allowing health insurer parent companies to shift profitability to other subsidiaries like care provision, pharmacy benefits management, and other healthcare services to boost earnings.

UnitedHealth Group exemplifies this model via its thriving and expanding Optum provider group. In 2022, Optum and UnitedHealthcare each had $14.1 billion and 14.4 billion in net earnings, respectively, contributing to UnitedHealth Group’s overall profitability. In what appeared to be a move to expand the parent’s company profits while avoiding the MLR caps, UnitedHealth Group transferred profit-capped insurance revenues to other divisions (Optum), known as “intercompany eliminations” totaling approximately $108 billion in 2022. In effect, when UnitedHealthcare insurance pays a UnitedHealthcare provider (Optum), the company pays itself, shifting profits. Take note, 2022 was not an aberration. As the company has gotten larger via vertical integration, intercompany eliminations have also grown. (In 2021, it was $91 billion.) This intercompany elimination paired with vertical integration created a giant loophole in the medical loss ratio.

Again, the cost of insurance — despite these cost reduction assertions — has not translated to improved outcomes or reduced costs.

Moving Forward

Policymakers should work to regulate insurers and guarantee access to care but often fall short, while corporate behemoths continue profiteering with minimal supervision.

Physicians and professional societies must also:

• Push for reform as a vocal, coordinated voice
• Highlight underpayment/no payments
• Maintain awareness of growing insurer control
• Advocate for regulatory controls, namely timely/appropriate reimbursement rates
• Encourage CMS to force Medicare Advantage plans to reduce administrative burdens for providers/patients
• Unite in their efforts to prioritize systemic issues over interdisciplinary squabbles

Other parties also have critical roles:

• The Federal Trade Commission must establish guardrails to protect patients and clinicians from uncontrolled vertical integration.
• Congress should close the MLR loophole that benefits insurers.
• CMS must play a greater role overseeing Medicare Advantage plan administration.

Conclusion

As insurance companies look to cut costs and maximize profits, patients are left to shoulder the burden of ever-increasing premiums, deductibles, and out-of-pocket expenses — forcing some to forego necessary care, leading to poor health outcomes and catastrophic consequences.

It’s imperative that we demand greater transparency and accountability from health insurance companies and the policymakers who regulate them, pushing for reforms that prioritize patient care, promote marketplace competition, and invest in alternative models boasting a patient-centered approach.

N. Adam Brown, MD, MBA, is a practicing emergency medicine physician, founder of ABIG Health, and a professor of practice at the University of North Carolina’s Kenan-Flagler Business School. Previously he served as president of emergency medicine and chief impact officer for one of the nation’s largest national medical groups.