The Question Congress Should Ask Stephen Hemsley

Why Over-Charge Seniors...?

The written, prepared testimony by insurance company executives released ahead of today’s hearings of the House Energy and Commerce Committee and House Ways and Means Committee includes most of what you would expect. Insurers largely blame other players in the system (e.g., hospitals, doctors, pharmaceutical companies, etc.) for raising health costs, just as I’m sure each of those groups would point the blame elsewhere if they were testifying before Congress on rising health costs.

The insurers also claim that they’re the only players in the health care system that have an incentive to drive down costs. Thanks to Obamacare, quite the opposite is true—because their profits are capped as a percentage of premiums, in many respects they can only grow their profits by growing their revenue base (i.e., a 10% profit margin on $500 yields more profit than a 10% profit margin on $100).

But UnitedHealth Group CEO Stephen Hemsley made an interesting claim in his testimony: “Though UnitedHealthcare is a relatively small participant in the individual [Obamacare] market, we will voluntarily eliminate and rebate our profits this year for these coverages, as Congress continues to work toward more long-term solutions.” To which one could easily respond: “Now do Medigap.”

As I have previously outlined in reports for American Commitment, UnitedHealth sells AARP-branded Medicare Advantage and Medicare supplemental insurance (i.e., Medigap) policies, and both UnitedHealth and AARP profit handsomely from same. In fact, AARP just received a $9.1 BILLION advance royalty payment from UnitedHealth in 2024.

But those profits come at a huge cost to seniors. UnitedHealth builds in a percentage-based “royalty fee” to AARP into Medigap premiums, such that AARP receives more money the higher premiums rise. You might even call it a “junk fee” that encourages both UnitedHealth and AARP to keep raising rates—AARP making health coverage un-affordable for its own members.

All of which raises a question that neither Hemsley nor UnitedHealth (nor AARP, for that matter) would want to answer: Why will you give up profits for your Obamacare line of business, while continuing to over-charge seniors…?

Time will tell if someone asks that question on the Hill today.