You’re probably sick of hearing about health insurance. I don’t blame you. Unfortunately, it’s a really important thing to hammer out, and it feels like no one is happy with the state of Obamacare or the industry at large.For the average person, health insurance (not to mention healthcare in general) is incredibly expensive; for health insurance companies, they’re losing money in Obamacare markets and are restricted by regulations; for the Trump administration, they just want to get rid of the Affordable Care Act. Or change it. Or are unsure what they want to do with it. Okay, no one really knows what the government’s plan is.But let’s go back to health insurance companies. Time after time, we’ve seen companies drop out of the Obamacare exchanges (looking at you, Arizona and Iowa and Tennessee and Kansas and Missouri) citing the high cost of coverage. That kind of makes sense; Obamacare required more comprehensive coverage from plans, and made insurers cover sicker people than they normally would have.It’s why we’ve seen premiums increase so much. But you know what else has gone up during Obamacare’s reign of terror? The stock prices of health insurance companies.When you compare the stock prices of five of the biggest health insurance companies to the rest of the market, you have to wonder what all the complaining is about.
Health insurance companies are growing – fast
We looked at the growth of the S&P 500, along with Aetna, Anthem, Cigna, Humana, and UnitedHealthcare, from May 22, 2012 to May 22, 2017. Over that five year period – starting before Obamacare was signed into law up through these uncertain days – the S&P 500 increased by 81.58%. That’s not bad. But compared to the health insurance companies, it’s nothing. Here’s what those increases looked like:
Aetna – +234.31%
Anthem – +159.44%
Cigna – +258.34%
Humana – +197.42%
UnitedHealthcare – +210.55%
The worst-performing of these companies grew at a rate of nearly double the rest of the market.Growth can be calculated in other ways, too. Employment in the health carrier segment increased by 4% from April 2015 to April 2016. The Insurance Information Institute attributes that to "the flood of health insurance applications, purchases, and claims attributable to the Affordable Care Act, and some to population growth," but notes that "this rate of growth has been characteristic of this sector for decades—long before the ACA was proposed."So Obamacare doesn’t appear to be hurting the average health insurance company worker, as employment continues to grow. But maybe it’s hurting those at the top?No, there doesn’t seem to be any hardship there, either. The median pay for health insurance company CEOs is higher than any other industry. Here’s the total 2016 compensation for the CEOs of the five companies we’re looking at:
Aetna’s Mark Bertolini made $29.7 million
Anthem’s Joseph Sweden made $16.5 million, a 21% increase over his 2015 compensation
Cigna’s David Cordani made $21.9 million, which was somehow less than half of what he made in 2015
Humana’s Bruce Broussard made $17 million
UnitedHealth Group (parent company of UnitedHealthCare) CEO Stephen Hemsley made $31.3 million
Note that only a fraction of this compensation is actually salary. Most of it is made up of stock options and, as we’ve seen, those have been on the rise. That’s not to say that CEOs shouldn’t be compensated for growing and maintaining successful companies, but for the average American, and especially Americans who have no or few healthcare options because it’s "too expensive" for companies to operate in their counties, those numbers can be hard to swallow.
Anthem’s "great quarter"
A recent earnings call with Anthem shows that the situation for health insurance companies may not be as dire as they’re made out to be. While certain segments of the Obamacare exchanges are costing insurers money, they’re doing very well overall.During the call, Anthem reported a net income of $1 billion in the first quarter of 2017. That’s not bad, especially considering it represents a 43.7% increase over the first quarter of 2016. Similarly, revenue grew 11% over the same time last year, to $22.5 billion.Anthem CEO Joseph Sweden summed it up well: "It was a great quarter."This is a representative snapshot of the argument over health insurance. Single-payer proponents don’t think that health insurance should be a business in the traditional sense. It should be used to take care of citizens; because health insurance necessarily is focused on the sick, sometimes this has to be done at a loss, and it makes more sense for a government to operate that way.Businesses typically don’t think like that. They’re there to turn a profit. On the one hand, it’s hard to vilify Sweden for his statement; he has a fiduciary duty to shareholders to do what’s in their best fiscal interest. On the other hand, should a health insurance company hold a fiduciary duty over a moral duty of helping the sick and injured afford healthcare? It’s a complicated question – and not one we’re likely to solve soon.
The benefits of health insurance growth
Here’s another way to look at this issue: What if the growth of health insurers is actually a good thing? We’ve already seen that employment in health carriers is continuing to grow. Cigna is a great example of the benefits of that.Recently, Cigna announced that it would give each of its more than 40,000 employees shares in the company. Stock is continuing to rise – it’s had the highest growth of the companies we’ve looked at over the past five years, at nearly 260% growth – which is great incentive for employees.Cigna is also growing its paid leave offerings. It’s expanding paid paternity and adoption leave, offering "up to four weeks of paid leave for employees caring for others including to support child bonding and ill family members." Other perks include a sabbatical program and stipends to support community work projects.Cigna’s employee base has grown 10% over the past year. Even though their CEO is handsomely compensated, they’re investing in their employees, too. Most of these are not the executives that are popular to rally against, but average workers trying to support their families. It adds another layer of complication to the issue of company growth. In this case, it’s benefiting employees, and isn’t that always good?If health insurance was an easy problem to solve, we’d have done it by now. The truth is that the issue is so sensitive, and the companies so big, that it’s hard to untangle. People have been saying for years that health insurance companies are on the way down, but that’s not what we’ve seen. It’ll be interesting to keep an eye on the continuing Obamacare replacement debate, how insurers react, and – almost as importantly – how the market reacts.