METARs often bash health insurance companies. But they are part of our economic landscape. If a health insurance company can’t make a profit it may drop a marketplace, leaving people with fewer options. And the investors will suffer, too.
Health Insurers Are Becoming Chronically Uninvestable
Companies like UnitedHealth, Centene and Humana are getting squeezed between rising costs and a stingier government
By David Wainer, The Wall Street Journal, July 10, 2025
Health insurance has never been a flashy, high-growth business. But for many years it offered something nearly as good: steady, dependable returns, fueled by the expansion of government programs such as Medicare, Medicaid and the Obamacare exchanges…
Lately, though, Wall Street has a problem with America’s health insurers: They keep missing their numbers. What began as trouble in Medicare Advantage has now spread across nearly all government-backed plans, signaling deeper issues in the model itself…
The trouble has sent shares of insurance companies plunging. This also comes as the recently passed tax-and-spending package is set to cut more than $1 trillion in healthcare spending over a decade. …
The core problem is that the assumptions insurers rely on to price plans—how many people will enroll, how sick they will be and how much care they will use—are no longer holding up. Medical usage has surged and become more volatile in the postpandemic landscape. Changes to how insurers and providers are allowed to bill and code care have eroded margins for payers. And the mix of healthy and sick enrollees in government-sponsored plans is shifting, as millions fall off insurance rolls…
On one hand, insurers are facing skyrocketing expenses—from costlier procedures and rising nurse wages to expensive drugs such as GLP-1s. On the other hand, they can’t pass those rising costs along to the government as easily as they once could, with healthcare already accounting for an exorbitant 17% of gross domestic product. …[end quote]
The people who choose to drop health insurance are likely to be relatively healthy, leaving a smaller pool of sicker insured people.
Medicare Advantage plans cost the government and taxpayers billions of dollars more than traditional Medicare. After years of reports, lawsuits and whistleblower accounts accusing big insurers of gaming the system and overcharging the government, the Biden administration made a series of policy changes that have negatively affected what the plans get paid. Meanwhile, a post-Covid surge in seniors’ medical costs caught insurers by surprise.
The big health insurers are industry giant UnitedHealth Group, Centene, Humana, Cigna and CVS. I owned CVS for a while but sold it when its drop didn’t seem to be reversing.
The entire health insurance market will be in flux due to the OBBBA whose health insurance laws don’t come into effect until 12/31/2026 (after the midterm elections). It’s highly uncertain what will happen.
Wendy