America's Ailing Health Insurers

America’s ailing health insurers An industry that has run on government money faces a reckoning Save Share Medications are stored on shelves at a pharmacy in Los Angeles. Photograph: Getty Images Jul 31st 2025 | 5 min read Listen to this story Few firms in America are more unloved than health insurers. As gatekeepers of the world’s costliest health-care system, their miserly response to claims is a constant source of patient unhappiness. Investors, by contrast, have long regarded them as soothingly safe bets: boring businesses with steady returns. That is no longer the case. UnitedHealth Group, the country’s largest insurer, stunned investors in April by reporting unexpectedly disappointing results. Within weeks it had replaced its boss and scrapped its profit forecast for the year. Its latest results, released on July 29th, offered more misery. Since November UnitedHealth’s market value has collapsed from $575bn to $240bn. Chart: The Economist The infection has spread. This earnings season has delivered a drip-feed of bad news. On July 17th Elevance Health, America’s second-largest health insurer, also cut its profit forecast for 2025. Centene, another big competitor, swung to a $253m loss in the latest quarter, from a $1.1bn profit a year ago. Another, Molina Healthcare, has lowered its earnings estimates twice in as many weeks, blaming a “season of great uncertainty”. Since mid-April the three firms have lost more than 40% of their market value. Only Cigna and cvs Health have avoided the rout (see chart 1). Both firms’ insurance operations are part of a bigger business, which has lessened the damage (see chart 2). The downturn reflects underlying symptoms. Medical costs are rising, regulatory scrutiny is growing and public funding is tightening. Investors are now coming to terms with how reliant these firms are on government money and how vulnerable they are to policy change. Chart: The Economist For many years, public programmes drove growth. Despite America’s lack of universal health care, the government still foots much of the bill for treatments. Medicare, a federal scheme for those aged 65 and older, covers more than 68m people. Most now choose Medicare Advantage, a private alternative under which insurers are paid to provide equivalent care but with added benefits. Medicaid, run by the states, serves low-income Americans and covers 71m (including 12m also on Medicare). Most states outsource the administration to private insurers. The Affordable Care Act (aca), passed in 2010, boosted the industry by providing subsidies for people who do not get health insurance from their employer but buy it from private firms on government-run exchanges. Altogether, public health-insurance programmes cover about 170m people, roughly half the population. Larry Levitt of kff, a health-policy think-tank, says with low expansion in employer-provided insurance, Medicare Advantage has become a growth engine for private insurers. It has also been lucrative. UnitedHealth’s revenues from Medicare and Medicaid have risen from $70bn in 2014 to $220bn in 2024. These programmes once brought in nearly three-fifths of its insurance income; now they account for nearly three-quarters. The government pays well. Medpac, a congressional advisory body, estimates that Medicare Advantage costs taxpayers 20% more per patient than standard Medicare. The model is now under strain. Medical costs are climbing at the fastest rate in over a decade. pwc, a consultancy, expects a rise of 8.5% in both 2025 and 2026, fuelled by pricey cancer treatments, growing demand for mental-health care and booming sales of weight-loss drugs. Patients on public plans tend to be especially costly. Mark Newsom of Avalere Health, another consultancy, notes that people enrolled on Medicare and Medicaid are “the sicker population” compared with those on commercial plans. They use more hospital services, have more prescriptions filled and need more care. Government payments are not keeping pace. s&p Global, a financial-data firm, forecasts that the medical-loss ratio, the share of premiums spent on care, will hit 88% this year for the big insurers, up from 83% in 2020. Most aim for 80%. The rise, driven by publicly insured patients, is eating into margins. More pain may be on the way. President Donald Trump’s One Big Beautiful Bill act (obbb), passed earlier this year, includes deep cuts to federal health-care spending. According to the Congressional Budget Office (cbo), a non-partisan agency, Medicaid funding will fall by $910bn over the next decade, equivalent to a spending cut of 14%. The obbb also imposes stricter conditions for coverage, including tougher and more frequent checks on eligibility. Meanwhile, generous subsidies for aca plans are due to lapse at the end of the year. These tax credits currently lower premiums for millions. The result, says the cbo, will be 16m more uninsured Americans by 2034 than would otherwise be the case. Those leaving the market are likely to be healthier, leaving insurers with a smaller, sicker and more expensive pool of patients. Regulators are also circling. On May 1st the Department of Justice (doj) filed a lawsuit against Aetna, Elevance and Humana, alleging they conspired to steer patients into Medicare Advantage. The doj claims the firms paid brokers “hundreds of millions of dollars” in kickbacks to push people toward their plans, even if those services were not in patients’ best interests. The companies deny any wrongdoing. UnitedHealth, for its part, revealed last week that it faces both civil and criminal probes into its billing practices. The Wall Street Journal reported that the firm allegedly inflated diagnoses to make patients appear sicker and trigger higher government payments. UnitedHealth says it has “full confidence” in its practices. Insurers are likely to pass on the added costs. Centene, the largest seller of Medicaid plans, expects states to raise payments. In the aca exchanges, most insurers are seeking premium increases of 10–20% for 2026, according to kff. Patients may lack sympathy over the industry’s pain but soon they may be paying for it to go away.■ To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. Explore more Health care Business United States