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Healthcare’s $450 bln octopus becomes the kraken

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The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Robert Cyran

NEW YORK, Feb 28 (Reuters Breakingviews) -UnitedHealth UNH.N is swallowing up the American healthcare system. The $450 billion company now insures 53 million people, works with 10% of the country’s doctors, manages pharmacy benefits, provides payment services and more. It’s to the point that this many-tentacled creature has achieved mythological kraken status and trustbusters may be keen to slay it.

It’s hard to dispute UnitedHealth’s market power. Its Optum business employs or is associated with 90,000 physicians. It also supplies the industry with data analysis and other technology. This non-insurance division earned more than insurance in the fourth quarter and generated $16 billion last year.

The share price reflects the dominance. UnitedHealth has returned over 1,900% to shareholders, including reinvested dividends, since the passage of the Affordable Care Act in 2010, triple the S&P 500 Index .SPX over the same span. The highly concentrated nature of healthcare insurance and soaring medical spending undoubtedly has helped. The U.S. Department of Justice is now investigating the company, according to the Wall Street Journal, understandably wondering if conflicts of interest are also padding profit and hurting consumers.

Insurers including UnitedHealth started expanding what they offer to cut costs. Local monopolies of hospitals and doctors, for example, can make it cheaper for underwriters to directly offer X-rays and other services.

Federal rules, however, limit how much from collected premiums can be spent on administration and kept as profit. An insurer that also provides medical care has less incentive to keep costs low, reaping higher fees on services to circumvent the insurance caps. It also can probably jack up premiums, especially with competition limited. Insurance plans with a higher percentage of expenses coming from their own related businesses spend more, according to a 2023 Brookings Institution study.

Whether UnitedHealth is doing anything untoward will take some digging, if only because of just how many services it provides and its interconnected operations. Internal payments from one part of the business to another totaled $136 billion last year alone.

Even if regulators uncover abuse, it isn’t obvious how they might stop it. Forcing insurers to get out of medical care could mean doctors end up employed by hospitals, which may have equally minimal reasons to lower prices. Cutting off one UnitedHealth arm may simply spawn another predatory octopus.

Follow @rob_cyran on X


The U.S. Department of Justice is conducting an antitrust investigation into UnitedHealth, one of the biggest U.S. healthcare insurers and providers, the Wall Street Journal reported on Feb. 27. Approximately 10% of the country’s doctors, or around 90,000 of them, are employed by or affiliated with the company, which also supplies data, technology, pharmacy benefits and payments services to the medical industry and whose insurance covers about 53 million people.

DOJ officials are examining how UnitedHealth’s acquisition and ownership of physician groups affects competition, as well as its Medicare billing practices and compliance with rules that cap the amount of premiums healthcare insurance plans can spend on administration and keep as profit, according to the newspaper.

The agency is already scrutinizing UnitedHealth’s planned acquisition of home healthcare provider Amedisys, which said last year that it had received a second request for information from antitrust authorities.

Editing by Jeffrey Goldfarb and Sharon Lam


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