Why Obamacare Won't Hurt Insurance Companies

Obama's regulatory overhaul may hurt taxpayers, but it's a boon for the biggest insurance companies.


What got President Obama's contraceptive compromise into the headlines was the religious angle. What deserves to keep it there is the economic angle.

After Catholic organizations complained that the federal government wanted to force them to include free contraceptive coverage in their health insurance plans, the White House announced a compromise. As the White House described it, "if a woman's employer is a charity, hospital or other religious organization that has a religious objection to providing contraceptive services as part of its health plan, her insurance company – and not the hospital or charity – will be required to reach out and offer her contraceptive care free of charge."

The Wall Street Journal nailed it in an editorial published Saturday: "There is simply no precedent for the government ordering private companies to offer a product for free." America's Health Insurance Plans, a trade association for the insurance companies, issued a statement that said, in part, "We are concerned about the precedent this proposed rule would set."

One wit emailed me the quip: "If Reagan was the Great Communicator, Obama is the Great Confiscator." How else to describe a president who tells a company it has to give away things for free?

But before shedding any tears for the insurance companies, check their stock prices. One of the most remarkable moments of the administration came on June 24, 2009, when, during a nationally televised ABC News "town hall" meeting on health care from the White House, Mr. Obama told Aetna's CEO, "Aetna is a well-managed company and I am confident that your shareholders are going to do well."

If you took that stock tip from President Obama, you would have done pretty well — shares in Aetna, one of the country's largest publicly traded health insurance companies, are up 89% since then, assuming reinvestment of dividends, far outpacing the 49% return of the Standard & Poor's 500 Index over the same period. Other large, publicly traded health insurance companies have also prospered during since that June 24, 2009 moment when passage of ObamaCare was far from assured. UnitedHealth Group is up an astonishing 120% since then. Humana is up 184%.

If you look at other inflection points, it's a similar story. Since Obama signed the health care bill into law on March 23, 2010, Aetna is up 33%, UnitedHealth is up 65%, and Humana is up 76%, all outpacing the 14% rise in the S&P 500 Index over the same period.

Since Obama's January 20, 2009, inauguration, Aetna is up 80%, UnitedHealth is up 127%, Humana is up 170%, and WellPoint, another large health insurer, is up 79%, all exceeding the 67% increase in the S&P 500 Index over the same period. For all the alarms that were raised during the ObamaCare debate that the regulation of profit and mandates of benefits, such as free birth control pills, would savage the insurance companies, the market seems to have a different opinion. That opinion seems to be that being one of just a few vendors of a product that the government is going to force every American to buy isn't such a bad business to be in. That's especially so given the high barriers to entry, both regulatory and capital, facing anyone trying to start a new health insurance company. If anything, the share prices are an affirmation not of the Republican criticism that ObamaCare would kill the insurance companies, but of the left-wing Democratic criticism that the bill was a government giveaway that would enrich the insurance companies.

The stock market may be underestimating the chance that the Supreme Court will strike down the individual mandate to buy health insurance that is an important feature of ObamaCare, or the chance that a Republican president or Congress will repeal the law. Once the individual mandate kicks in and the subsidies for coverage start increasingly flowing through the federal budget — both conveniently scheduled for after the presidential election — maybe the government will go back to the insurers and try to negotiate a better deal for taxpayers that goes beyond a few free birth control pills for employees of religious charities.

In the meantime, though, the next time Mr. Obama names a public company in an industry that he's about to launch a vast regulatory overhaul of, and declares that he's "confident" that "shareholders are going to do well," believe him, for once. He's in a position to make it happen. If only we could all be confident that American taxpayers, insurance purchasers, and medical patients would do as well, too.

Ira Stoll is editor of and author of Samuel Adams: A Life.

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  1. Crony capitalism keeps on keeping on. I have no doubt that the insurance companies will win, regardless of the fate of Obamacare.

    A lot of the existing problem before the stupid law was enacted was that government was too involved with the delivery of healthcare and in bed with insurers.

    1. What is this “problem” of which you speak?

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  2. If you took that stock tip from President Obama

    That I didn’t take the tip, I will blame on Reason for convincing me that Obama is a useless, shitspewing, retard.

    1. My hedge against freedom is GE.

      1. what about investing in batons, tasers, teargas, and assorted riot gear?

        I’m thinking those will experience serious growth in the near term.

        1. No.

          1. 1. fuck the economy
            2. brutally crush the ensuing rebellion
            3. Profit.

    2. Conservatives make lousy investors as a rule. Larry Fink manages $3.7 trillion and recently said to go 100% into equities.

      1. The liberal kind simply knows that investing in government connections provides the best possible return.

        1. I’d say this is true on both sides of the aisle. The language just differs.

          1. Oh, I agree. I just know shrike hates conservatives.

  3. This is why I laugh when people tell me that Obamacare is a victory for people over the health care industry. The government forcing millions of people who didn’t have health insurance to become customers is one of the best things that has ever happened to health insurers.

  4. It will be good for the insurance companies until the pols need a fall guy for why the policies are not increasing care and lowering costs. Then watch out investors.

  5. If you’re a soulless piece of shit, now would probably be a good time to be an insurance lobbyist in DC.

  6. Its always about the precious money. Money money money!

  7. Those inflection points in the share prices of major insurers describe the captivity of investors to the status quo.

    The absence of new insurance start-ups is clearly what such implicit cartels are designed to encourage, along with the inability of investors to allocate capital to more efficient uses.

  8. The largest insurance companies will become government agents for the enforcement of Obamacare. They’ll make out like bandits plus get a guaranteed income.

  9. Well it is very very true that ObamaCare will put out of business several thousand SMALL and MEDIUM Sized Health Insurance Companies!

    Currently, there are over 4200 companies sell health insurance across the USA – with the increased regulatory costs and barriers to entry in Obamacare the number of Health Insurance companies will be reduced/consolidated into about 5 or 6 huge ones (the ones cited in the article)

    investors are not idiots – they understand perfectly well that government intervention will make the big get bigger at the expense of the small/medium firms and individual customers!

    We can see the “prototype” for this industry consolidation at the state level in Maine which passed a RomneyCare/ObamaCare government “mandated” takeover called “DringoCare” – in Maine, after 10 years of government mandated insurance the number of health insurane firms operating in the state went down from 16 to 1 within 10 years!

    At yes, government “individual mandated” health insurance IS government run health care since the government effectivively IS the major customer via the insurnace subsidies, has control over the profitablility of the insurance firms via regulation, and thru forced participation of 100% of the population!

    The fact that Obama allows some “crony capitalism” by allowing some eltie private firms/people to “manage” the government run health care for a profit doesnt change the fact that the State is in total control!

  10. The largest insurance companies will become government agents for the enforcement of Obamacare. They’ll make out like bandits plus get a guaranteed income.

    Exactly, if this was not the case the largest insurance companies would have fought tooth and nail for it not to pass. What Obama care amounts to is “Health Insurance” company “bail out”.

    Just like the super banks and GM got “help” the super insurance dealers got an even larger and pre-emptive “deal”

    When will the sheep wake up and see that crony capitalism is killing this country piece by piece.

  11. Obama and Progressives simply know better than you do how to spend your earnings and how to interpret the Constitution to get it to allow government to craft the laws which Progressives know best how to craft.

    Don’t you racist, sexist, homophobic, antisemitic, corporate whores get that?

    1. Haha nice, you wrote that pretty well.

  12. The large insurance companies only benefit because research analysts began writing volumes about future expectations, and retail investors ate it up. Unfortunately, this is short term. Obamacare will not have a positive effect LONG-TERM. It will stiffle growth & innovation and increase costs across the board. Within that 1000 page document, the most important input for the healthcare industry’s success is not addressed- quality.

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