While Congress Battles Over Healthcare Reform, Insurance Companies Record Strong Profits

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While Congress battled over healthcare reform for the majority of the past two months, health insurance companies recorded strong profits during the second quarter of this year. Part of the reason for the strong quarter is less exposure to Obamacare, some analysts speculate.

Reports indicate that the top six health insurance companies in the U.S. topped $6 billion in profits during the second quarter of 2017. The figure is up 29 percent from the same quarter last year and easily outpaced the S&P 500 health care sector. A.J. Rice, a managing director at UBS and healthcare sector analyst, said the profits stem from less exposure to the Obamacare Health Insurance Marketplace. Rice also stated the companies were able to seize on their original core business model, which is offering mid and large-sized employers health insurance coverage for employees.

Three of the top insurance companies in the U.S., Aetna, Cigna and Humana, saw a 45 percent increase in their adjusted earnings. However, all three companies are still losing money on Obamacare coverage plans. United Health Group and Centene saw their adjusted earnings increase by 25 percent while Anthem fell behind with just a 2 percent increase. All six companies saw their stock prices reach all-time highs this year.

Several of the top companies derive their earnings from the Medicare and Medicaid markets. According to CNBC, Aetna earns half of its revenues from government insurance plans. A lower medical cost trend also helped the insurance companies with their bottom lines. Changes in plan designs have kept the rise in medical costs at single digits, and analysts expect costs to stay in the single digits for the rest of 2017.

There is plenty of uncertainty about the future of Obamacare. Open enrollment starts in the next few months and Centene and Anthem plan to continue offering coverage on the healthcare exchanges. The biggest uncertainty is whether or not Donald Trump will continue offering subsidies for low-income Americans.

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