The story inside United Healthcare's jumping profits
Posted by Judy Dugan
Wall Street was moderately pleased today that the first-quarter profits of United Healthcare, the biggest health care company in the U.S., jumped 21 percent in the first quarter. By definition, that means the rest of us shouldn't be, because every dollar spent on overhead--including profit--is a dollar less spent on making us healthier. That's the Catch 22 of our whole for-profit health care system--insurers will do whatever it takes to keep Wall Street happy even when we're all required to buy their product.
One reason UHC did so well, even though it lost commercial business in the quarter, is that it spent fewer of our premium dollars on health care. Its "medical loss ratio," i.e. the dollars it "lost" by having to provide actual health care, dropped from 82.4 percent of premium revenue to 81.3 percent. The company credited a mild flu season and strong expense
"Strong expense management" refers to the pencil-pushers in the back room whose job is to delay and deny the care your doctor prescribes. Delay is almost as profitable as denial. Every day a dollar is not spent is a day it earns interest for the company. Yet this is one of the functions that insurance companies are now transferring into the "medical care" column.
Why? From the Reuters story:
The medical loss ratio (MLR), which Wall Street has always
watched closely, has come under increased scrutiny by
Washington and will be regulated under the new law.
The government is in the process of devising rules for how
the MLR will be calculated and applied, causing uncertainty for
By moving administrative jobs into the medical care category, United Health Care will be able to meet health reform requirements for medical loss ratios of up to 85% without sweating, and still make just as much profit.
A lot of what insurance companies can get away with will depend on how new regulations to govern the health care reforms are written--and who gets to write them. So keep an eye peeled for news about that regulation stuff, no matter how much it hurts.
3/24/2015News StoryConsumers' growing appetite for healthier fare is pushing together two of the world's largest processed-food companies... More >
4/29/2012News ReleaseSANTA MONICA, CA – Consumer Watchdog today called for a Senate hearing into the Google Wi-Spy scandal and urged that a... More >
7/12/2012News StoryMARK GORDON of Whitestone, Queens, figures that buying six Hyundais over the years classifies him as a loyal customer.... More >
1/4/2010Blog PostTuesday is a big day for those trying to figure out just what Google is planning for the increasingly important mobile phone... More >
1/5/2010Blog PostIt's clear that any final version of health reform will be controlled by private, largely for-profit insurance companies. Their... More >