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PaperclipPerfector  7d ago (text post)   23145 thread views

Culture War Roundup for the week of December 29, 2025

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Insurance companies are legally obligated to pay out 80% of premiums. I'm sure there are plenty of cases where they deny claims for bullshit reasons, and this is perhaps even part of their business strategy, but the big picture is that they spend the vast majority of premiums on payment for care.

It's not clear to me what "shifting profits" has to do with this, because the regulation is about how much premium revenue is spent on healthcare rather than anything to do with profits.

Vertically integrated insurance companies can charge themselves more so it looks like patients get more bang for their buck. The PBM (owned by the health insurance company) charges the health insurance company a high price for a drug, increasing "payout" (numerator of the medical loss ratio) while simply shifting revenue internally. The same thing happens with insurance-owned clinics and pharmacies.

https://healthjournalism.org/blog/2025/12/reports-show-health-insurers-skirt-medical-loss-ratio-rules/

Retail pharmaceutical spending accounts for 10% of total health spending. It's not the reason for high costs.

The same thing happens with insurance-owned clinics

What fraction of healthcare spending goes through insurance owned clinics?

It's at least the reason for high drug costs.

If you look at UnitedHealth's 10-k, Optum (the provider network) made $253b in revenue, but $151b of that was 'internal eliminations' transfers from UnitedHealthcare (the insurance arm) to Optum.

https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2024/UNH-Q4-2024-Form-10-K.pdf

I don't see "internal eliminations" in that document.

Gemini suggests that the document says UHC got $290B in premium revenue and Optum Rx earned $80B and Optum health earned $64B primarily from UHC. I don't think the other Optum divisions could be considered patient care upon a cursory check.

That is a significant chunk of UHC premium revenue, so I take your point there. However, the money staying in the family like this would make UHC more likely to pay out claims than if it were going to a truly external company, and yet the common complaint is that they don't pay out enough.

It's on page 30 as 'eliminations'.

UHC pays its own doctors more, and in general insurance companies will steer customers towards their own, more expensive facilities, but there's limited studies on how it affects care in general. You'd think that it should increase the number of procedures done at least, but that's not so clear.

https://www.hks.harvard.edu/faculty-research/policy-topics/health/study-finds-vertical-integration-medicine-leading-higher

The study found that when independent physicians integrated with a hospital, they changed their care practices (for example, by reducing the number of patients they put under deep sedation) and increased their throughput (measured by the number of patients they treated). Specifically, the integrated physicians reduced their use of deep sedation by about 3.7 patients for every 100 treated. However, patients of integrated physicians experienced “a significant increase in both major post-colonoscopy complications such as bleeding (3.8 per 1,000 colonoscopies) and other complications such as cardiac or nonserious GI symptoms (5.0 and 3.3 per 1,000 colonoscopies, respectively).”

The researchers found that the reduced use of deep sedation “at least partially explains the increase in adverse outcomes” and that it was “driven mainly by hospitals no longer allocating expensive anesthesiologists to relatively unprofitable colonoscopy procedures.”

Moreover, integration increased the number of patients a physician was able to treat and elevated reimbursement per procedure—integrated doctors were reimbursed about $127 more per colonoscopy procedure than independent doctors, or about 48% more.

The $151B number is listed as "Eliminations" on page 28; the same number is broken out by segment as "Total revenues - affiliated customers" on page 66. (The missing $7B is Optum Insights, an IT vendor that seems to sell software to both UnitedHealthcare and the other Optums.)

As I understand it, this is part of the problem: since your loss ratio is floored at 80%, you don't have a strong incentive to manage costs. There is actually a bit of the opposite one: the higher the costs, the higher the premiums, and the bigger is the base from which you derive profits.

That's certainly true. But that would incentivize insurance companies to pay out more claims.

Insurance companies are probably not sufficiently motivated to play hardball with providers on costs. At the same time, people are getting most of their premiums back even if they don't like how much care they get for those premiums.

People aren't getting most of their premiums back. The healthcare system is getting most of the premiums rather than the insurance system, and it's not showing up as profit, but rather being paid to support the health care bureaucracy.

ETA: And sometimes the same entity is on both sides of the transaction, as @yunyun333 points out.

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