Before there were Blue Cross or WellPoint plans, a group of Dallas school teachers agreed to prepay hospital care at a monthly cost of 50 cents each – which many consider the first modern healthcare insurance plan.
Together with new tax laws that made employer-sponsored insurance nontaxable, this led to an explosion of commercial health insurers after WWII.
Blue Cross/Blue Shield
Many Blue Cross/Blue Shield (BCBS) plans are still nonprofit organizations, yet a core of them have recently converted to for-profit status, leading to concerns over its future and whether or not it can continue serving a public benefit. Some of the BCBS plans that have converted are among the country’s largest plans with millions of members; their financial motivations for conversion include access to investor capital, multistate employer accounts served efficiently across states or regulatory structures and expanding products and services while protecting against widespread consolidation among commercial insurers.
Research regarding the effects of scale in health insurance is somewhat inconclusive; however, some studies indicate that larger plans may be more cost-efficient due to being able to negotiate lower provider prices and having shareholders as motivation can encourage management to improve profits, thus potentially reducing administrative costs. Yet other studies have not detected any distinction in efficiency between for-profit and nonprofit BCBS plans.
At its core, for-profit conversion can help plans raise more funds from investors to expand their networks and invest in innovative technologies. BCBS was among the first insurers to introduce telemedicine services that allow members to consult doctors remotely; additionally it has established partnerships with local organizations that address social determinants of health such as housing or accessing nutritious foods.
As well as these factors, for-profit conversion gives BCBS plans the chance to grow market share and strengthen their competitive standing. Many plans have already seen substantial increases in profits since making the switch; one Blue Cross plan in Georgia for example increased operating margins annually after their conversion. It was later acquired by Wellpoint but continues to have margins above industry norms today.
Empire Blue Cross in New York has experienced strong market growth, reduced rates of competition from other insurers and managed to effectively compete with smaller non-profit Blues plans by offering more specialized coverage at reduced prices from hospitals and physicians.
WellPoint
WellPoint experienced rapid expansion during the early 1990s due to acquisitions of Blue Cross plans across various states. By the end of that decade, WellPoint was one of the nation’s premier managed health care companies and held the highest market share among for-profit insurers under Affordable Care Act regulations for both individual and small-business markets.
Leonard Schaeffer, WellPoint’s CEO, made it clear that their goal was to become a national player and become the largest publicly held managed health care company worldwide – a significant shift from its roots as a mutual insurance company with strong customer service values.
WellPoint purchased Massachusetts Mutual’s Group Life & Health subsidiary for $380 million, expanding their operations beyond California into 10 additional states while also gaining access to their dental and group life business; an invaluable addition for customers.
WellPoint’s acquisition of Mass Mutual business increased earnings but did not significantly alter its bottom line, since WellPoint was already profitable and in good financial health prior to this deal. Furthermore, this did not jeopardize WellPoint’s strong reputation as an outstanding provider of managed healthcare services.
WellPoint’s aim is to revolutionize the industry through superior member satisfaction and product and services delivery, offering individuals a choice of coverage options while giving them control of their own health and financial futures. Furthermore, WellPoint focuses on its corporate financial health with an eye toward producing superior long-term returns for shareholders.
WellPoint stands out among Obamacare-mandated state insurance exchanges as one of the major players due to its expansion into both individual and small-business markets. According to WellPoint’s own estimates, they have attracted over one million customers in 14 states where they operate Blue Cross Blue Shield plans; as competitors have also expanded into these exchanges, WellPoint must fight hard for its share in this new market.
Cigna
Cigna Group, LLC (Cigna) is an American multinational managed health care and insurance provider. Operating across three sectors – U.S. Commercial, Government, and International Health – revenues increased 14% year-on-year for their first quarter 2024 results while their adjusted pretax income from operations was up 20% year-over-year, reflecting strong performance across their businesses as well as continuing operating efficiencies.
Health insurance experienced unparalleled growth throughout the 20th century. Early policies were created to compensate workers who missed work due to illness or injury; at that time disease was prevalent, making long absences costly for lumber companies that relied on manual labor. With antibiotics and nonsteroidal anti-inflammatory medicines becoming widely available, illness healed much quicker while hospitalization costs decreased dramatically, making compensation secondary.
As the industry grew, so too did insurers’ profit potential. Over the last two decades, investor-owned for-profit health care organizations have seen exponential growth; many observers have voiced concerns over their effect on quality and access to health care, medical education and research as well as profitability of such institutions – often tied to changes in how doctors are trained or types of procedures they perform.
Furthermore, for-profit corporations have made substantial investments in lobbying to advance their interests in state legislatures and federal regulatory agencies, leading to influence peddling that has resulted in distortions to public policy and reduced democratic oversight.
At Cigna’s earnings call Friday, CEO David Cordani pledged the company would fully comply with Medicare Advantage audits announced Thursday by CMS and are intended to recover billions in overpayments. MA represents only about 5% of Cigna’s portfolio so lower rates won’t significantly hurt business operations; Evernorth Health Services division remains its priority business line of growth.
UnitedHealth Group
UnitedHealth Group, known by its stock symbol UHG, is an example of consolidation. Today it ranks as one of the world’s largest health care conglomerates and controls which doctors and hospitals millions of Americans can visit as well as whether coverage will be granted for medically necessary or lifesaving treatments. Furthermore, UnitedHealth Group excels in pharmacy benefit management, financial services, medical data harvesting services as well as harvesting.
At the time, policymakers began viewing health care costs as a major issue. Policymakers increasingly blamed traditional physician reimbursement arrangements–fee-for-service models where patients and insurance companies paid directly for each test, procedure or treatment ordered without much negotiation–for driving up costs; such systems encouraged doctors and hospitals to order unnecessary tests or procedures that led them to increase spending on health care services overall. The company emerged during a period when policymakers had come to view healthcare spending as an increasingly serious challenge.
Responding to rising health care costs, business executives and their political allies began placing blame for these increases on patients themselves, arguing they overused medical products and services and needed more “skin in the game.” This tactic was successful for several insurance companies including Blue Cross/Blue Shields.
By the mid-1990s, however, Blues began losing ground to for-profit competitors. By the end of the decade, their medical loss ratio had declined below 80 percent and they were losing money while spending more on advertising, lobbying and administration than actual care services.
To combat this trend, Blues insurers began buying up physician groups and creating their own health maintenance organizations (HMOs). Furthermore, they started emphasizing their services in the employer market – an action which eventually saw them transition away from being insurers into more of service providers focused on administrative costs and customer satisfaction.
UnitedHealth Group earned more than $20 billion in profits during 2022, more than any American health insurance company could. Their revenue increased nearly 15%. Optum, their subsidiary that handles health plans and customers services for their customers, saw 18% growth year-on-year. Furthermore, UnitedHealth purchased several data-centric service companies such as NaviHealth that analyze patient claims for medically unnecessary procedures.