The economic recovery has been very uneven. The stock market has appreciated 75 percent over the past five years while wages have been stagnant. Here’s one group that has done well over the past five years: people who own stock in health insurance companies.
The trade journal Modern Healthcare has the story of the health insurance stock boom:
In other words, the age of Obamacare is the age of lush profits for the biggest insurers. This certainly clashes with the focus-grouped, poll-tested anti-insurer rhetoric Democrats used to pass the bill. It also clashes with the language Democrats use today to raise money.
Obamacare forces people to buy health insurance; it subsidizes their private insurance; it increases Medicaid, which is often run through private insurers; and more. The law created new fees and taxes, but insurers have announced they will simply pass those new costs onto customers, who, by law, are required to buy this product.
Most importantly — for both consumers and shareholders — Obamacare is also driving consolidation in the industry. In 2011 and 2012, the big insurance companies bought up some smaller ones. Modern Healthcare, in another article this month, explained that a second wave of mergers is coming. Hospital mergers have been another fruit of Obamacare.
More starkly, the law keeps out new competitors, building a moat around the existing insurers. As was laid out at an AEI event in 2013, “By capping the medical loss ratio, you guarantee that only the incumbent players are in the marketplace. New insurers can’t launch without losing a lot of money in the initial years.”
This suggests less competition, thus larger profit margins.
These effects of the law are one reason, as Barney Frank recently explained, “Nobody who makes their money in healthcare is going after that bill.”
The New York Times explained last year, “[S]ince the Affordable Care Act was enacted in 2010, the relationship between the Obama administration and insurers has evolved into a powerful, mutually beneficial partnership.”
And insurance company stockholders are reaping the benefit.
