After a college student finally found a treatment that worked, the insurance giant decided it wouldn’t pay for the costly drugs. His fight to get coverage exposed the insurer’s hidden procedures for rejecting claims.
www.propublica.org
More than 200 million Americans are covered by private health insurance. But data from state and federal regulators shows that insurers reject about 1 in 7 claims for treatment. Many people, faced with fighting insurance companies, simply give up:
One study found that
Americans file formal appeals on only 0.1% of claims denied by insurers under the Affordable Care Act.
UnitedHealth Group annual gross profit for
2023 was $90.958B, a 14.24% increase. UnitedHealth Group annual gross profit for 2022 was $79.617B, a 14.31% increase from 2021. UnitedHealth Group annual gross profit for 2021 was $69.652B, a 3.96% increase from 2020.
Do you suspect this particular CEO had a vested interest in serving those patients with needed care or denying coverage in order to meet EPS targets and shareholder value?
Thoughts and prayers?
Listen, I don't exactly want to defend a health insurance company...but the resident insurance employee (non-health division) maybe a bit of context is appropriate. Gross profit is not really an accurate reflection of actual profit the way that operating revenue, EBIDTA and net profit are. United's revenue number for 2023 was $371b, operating revenue was $32b, EBIDTA $36b and net income $22b. The real profit number is the $22b net profit, about a 6% profit ratio. UHC's revenue, gross profit, operating revenue, EBIDTA all increased at around the same rate (14% give or take) from 22 to 23 while the net income increased slightly slower (11%).
Given that UHC's net profit growth roughly lines up with the revenue growth, the increase is mostly coming from market share growth rather than from rate growth or from a hard market. In insurance terms, a hard market is when we can increase premium rates faster and a soft market is where it is more difficult to increase rates in comparison to actual claim experience. I work in liability insurance, so we have a longer tail (time from bringing in revenue to spending it), health insurance is a short tail market segment. UHC's revenue and expenses are basically coming in during the same 12 month period which means there is almost no opportunity for them to invest that revenue to offset some of the claim expenses. Liability insurers can often operate at a loss and use investment income to make up the difference. In short, if we are making 15% on market investments, there is more flexibility on premium revenue matching up with claim experience.
For comparison, Apple 2023 has a very similar top line revenue number ($391b) but had operating revenue of $123b, EBIDTA $134b and net income $94b for a 24% profit ratio. Profit ratios for the rest of the Fortune Top 10: Walmart's 2%, Amazon 5%, ExxonMobile 10%, CVS 2%, Berkshire 26%, Google 24%, McKesson 1%; Chevron 10%. That's three retailers with lower ratios; 2 gas companies roughly the same 10%, two tech companies at 24%, a wholesale drug supplier with very low profit ratio (McKesson) and 2 insurance companies (Berkshire's core business is liability insurance not Buffet's investing) with vastly different ratios, UHC being the lesser. Berkshire's ratio however will be much more volatile, sometimes negative, while UHC will typically be more steady.
I agree with the characterization that UHC is a middleman who is taking a 6% cut. But it is not nearly as large of a cut as most believe. I also agree that universal health insurance/Medicare would benefit the US. But someone has to administer it and there are about a million people working in the health insurance industry. Universal Medicare means you either put them on the Federal payroll or you farm it out to the insurance industry. There is more fat in the private side but not as much as most believe.