Congress finally hauled the nation’s insurance giants to Capitol Hill to explain why their profits have skyrocketed at taxpayer expense while their approval ratings with the American people have plummeted. The hearings were a necessary first step, but asking CEOs tough questions is a lot easier than passing policy reforms that would diminish their power and ability to capture vast sums of taxpayer dollars — that will take hard work.
For the better part of two decades now, Democrats who once wanted to destroy the health insurers have swung far in the other direction, embracing them in a hand-in-glove partnership to together exert control over the American healthcare system. Their partnership has served their mutual interests, but is driving up healthcare costs and squeezing patients dry. As premiums soar past $25,000 a year for families, real reform is desperately needed.
This alliance was on full display as Rep. Frank Pallone (D-NJ), ranking member on the House Energy and Commerce Committee, publicly assured health insurance executives that rising healthcare costs were “not your fault,” reinforcing a pattern of deference to the industry rather than accountability.
Democrats shut down the government for six weeks last fall to demand another huge ransom of tax dollars, shipped directly to insurance companies to paper over the death spiral Obamacare finds itself in.
While patients struggle to afford care, insurance giants receive billions in taxpayer dollars through programs such as Obamacare and Medicare each year. UnitedHealth has even functionally acquired AARP by paying hefty royalties on AARP-branded insurance products, including an astonishingly large $9 billion payment in 2024 alone.
Nowhere is this dysfunction more evident than in Medicare Advantage, another wasteful federal program that costs taxpayers an extra $84 billion each year in overpayments to big insurers. The program is riddled with inefficiency and susceptible to abuse. Lengthy prior authorization processes delay care, restrict access to vital treatments, and leave seniors waiting when they need help most. Insurance companies also exploit the system through upcoding, packing on unnecessary diagnoses to trigger more payments. Insurers hijacked Medicare Advantage, originally intended to increase access for seniors, and morphed it into their personal cash cow.
In employer and individual plans, there are similar incentives to inflate claims because of Obamacare’s so-called Medical Loss Ratio regulation, which requires insurers to pay out 80 to 85% of the premiums they collect in claims. Those caps mean they can’t increase their profits through efficiencies or bargaining for lower prices, but instead by paying out as much as possible in claims and acquiring providers so they can pay claims to themselves at inflated prices.
TRUMP LAUNCHES WRECKLESS WAR ON CREDIT CARDS
Big insurers are major drivers of America’s rising health care costs, not just through their business practices but through their political advocacy and never-ending demands for tax dollars.
Congress and the administration must reform this mess, redirect employer and tax dollars from insurance companies to patient-controlled vehicles, and open a wide array of insurance products — including Obamacare-exempt plans — and direct-pay medical services, with price transparency and real competition. Every time the Democrats and the big insurers pass healthcare legislation, things get worse. We need to move in the other direction, and quickly.
Phil Kerpen is the president of American Commitment and a co-founder of the Most Favored Patient initiative.