Bloomberg News

Insurers Face $1 Trillion Revenue at Stake in Health Law

May 14, 2012

Health insurers will gain $1 trillion in new revenue over the next eight years under the 2010 health- care law, assuming it’s upheld by the Supreme Court, according to a Bloomberg Government study.

The amount is equal to about one-half percent of the nation’s estimated gross domestic product from 2013 to 2020, and insurers led by UnitedHealth Group Inc. (UNH:US) would keep about $174 billion -- $22 billion a year -- for profit and administrative costs. The money comes from U.S. subsidies to people purchasing insurance beginning in 2014 and an expansion of Medicaid, the government’s health program for the poor.

The Supreme Court is weighing whether the law’s requirement that most Americans carry health insurance is constitutional. If it isn’t, the court will decide how much of the law to strike down. Should the law survive the court’s review and Republican efforts at repeal, it is projected to expand insurance to 32 million Americans who lack it by 2016.

“It’s a confirmation of, one, how much money we’re spending as a nation on health care; and two, how much is riding on this court case and the Supreme Court’s decision,” Matt Barry, a Bloomberg Government health analyst and the study’s author, said in a phone interview. “You’re talking an amount of money here that can affect the economy, not just an industry.”

About 9 percent of the insurance industry’s total revenue from 2013 to 2020 hinges on whether the health law stands, according to the study.

State Exchanges

Starting in 2014, states are required to open new insurance marketplaces called “exchanges” that will sell subsidized policies to people who don’t get coverage through their jobs. People who earn wages close to the poverty level, about $23,000 for a family of four in 2012, will be made eligible for Medicaid.

Barry’s study calculates that subsidizing private insurance premiums will cost taxpayers $557 billion through 2020, while the Medicaid expansion will cost the federal government $669 billion. The two provisions account for 98 percent of new spending in the law, the report said.

About 58 percent of that spending would pass through insurers. They would get another $322 million from consumers’ share of premiums.

Under the health law, insurers must spend at least 80 percent of their premium revenue on medical care, so most of the $1 trillion will flow to hospitals, doctors and other health providers.

‘Good for Consumers’

“This is a law that’s good for consumers and good for business, and there are a trillion reasons why it’s good for the insurance industry,” said Ethan Rome, executive director of Health Care for America Now!, an advocacy group that supports the health law and is critical of insurers.

The insurance industry, through its Washington trade group, America’s Health Insurance Plans, provided about $86 million to the U.S. Chamber of Commerce in 2009 to help fund a lobby and advertising campaign against the law. A spokesman for AHIP, Robert Zirkelbach, declined to comment on the Bloomberg Government study.

Mitt Romney, the presumptive Republican nominee for president, has said he will seek to repeal the health law if he’s elected in November.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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  • UNH
    (UnitedHealth Group Inc)
    • $102.68 USD
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