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The health insurer will see you now: How UnitedHealth is keeping more profits, as your doctor


Next year, UnitedHealth Group — one of the largest health care companies on the planet — expects to make a lot more money in a relatively simple way: by funneling more of the insurance premiums it collects from workers and taxpayers toward itself.

That’s possible because UnitedHealth, known for its sprawling insurance presence, has pivoted to become one of the largest providers of outpatient care by acquiring numerous physician practices, surgery centers, urgent care facilities, and pharmacy benefit managers. And whenever possible, UnitedHealth is directing more of its insurance members to get care and prescription drugs through those entities that are owned by its Optum division — essentially allowing its left hand to pay its right.

“United’s one of the biggest providers in the country,” said Spencer Perlman, director of health care research at Veda Partners. “The insurance side has a cap on profitability. Providers don’t have that. So [United is] passing money from the insurance side to the provider side.”

What UnitedHealth has done is part of a long, deliberate shift in the industry. A decade ago, when the Affordable Care Act was changing the standards for what care had to be covered, health insurers were worried that selling and administering insurance wasn’t going to be as profitable. For example, they could no longer turn people away if they had cancer or some other health condition. So insurers made it a priority to enter other areas of health care — in particular, owning more providers that operate outside of hospitals.

“Now, they view themselves as health care delivery companies and not as insurance companies,” said Cheryl Damberg, a senior economist and health care director at RAND Corp. “They’ve recognized there’s a lot of revenue to be had on the provider side, and they can capture it directly.”

There’s a straightforward way to measure this shift. UnitedHealth’s “intercompany eliminations” will total up to $130 billion in 2023, according to estimates the company released at its investor day last week. That figure, roughly equivalent to the GDP of Morocco, is a 20% jump from this year and more than double the amount from 2019.

Intercompany eliminations represent money — the insurance premiums and fees that come from workers and taxpayer-funded government programs — that flows from one part of the conglomerate to another. However, it can’t be recorded as revenue because UnitedHealth is paying itself with money it already booked.

For example, UnitedHealthcare insurance plans usually use UnitedHealth’s OptumRx for dispensing drugs. So when one of those members fills a prescription, money is transferring from UnitedHealthcare to OptumRx — but staying under the UnitedHealth umbrella. If a UnitedHealthcare member gets care at one of Optum’s physician clinics, the insurer is cutting a check to the provider — all of which, again, falls under UnitedHealth.

A pure health insurance company is limited in how much profit it can make. Federal law stipulates that insurers can keep no more than 15-20% of medical premiums as profit for itself. That means 80-85% of the money it collects has to go out to hospitals, doctors, pharmacies, and other providers. But providers have no limits on profits, so if an insurer owns those entities, it’s able to pay itself “unregulated earnings,” said Doniella Pliss, a director at the insurance credit ratings firm A.M. Best.

The fastest-growing component of UnitedHealth’s eliminations is provider groups. In 2017, 23% of the company’s insurance revenue went toward the provider unit called Optum Health, and 69% went toward OptumRx. So far in 2022, 38% of that money went toward Optum Health, while 56% was captured by OptumRx.

Optum Health now employs or is affiliated with 70,000 physicians, an increase of 10,000 from 2021. The company quietly acquired several prominent physician groups this year, including Kelsey-Seybold Clinic in Texas and Atrius Health in Massachusetts. This division is only getting bigger, as UnitedHealth is in the process of buying LHC Group, a large provider of home health and hospice services.

A UnitedHealth spokesperson attributed the growth of intercompany eliminations to the “growth of value-based contracts, in which UnitedHealthcare pays Optum to take on more risk.” UnitedHealth executives have made it clear Optum providers accept insurance from almost all other insurance companies. But the company also has intentionally bought providers located in places where many people already have UnitedHealthcare insurance.

“They are still primarily trying to build out Optum Health in markets where United would be their largest customer,” said Gary Taylor, a health care analyst at Cowen who tracks UnitedHealth and other insurers.

The strategy has paid off for the company. UnitedHealth’s stock price has significantly outpaced the major stock indices over the past decade, enriching executives and shareholders. The windfalls have spurred other insurers to copy UnitedHealth.

CVS Health bid on One Medical earlier this year, ultimately losing out to Amazon, but it acquired Signify Health and has built out its MinuteClinics and its own PBM. Humana has acquired both home health and primary care groups, and is on the hunt for more. Cigna recently invested $2.5 billion in primary care group VillageMD, after saying for years that it wasn’t interested in owning providers. Many Blue Cross Blue Shield plans have not embraced buying provider groups, although Elevance (the Blues company formerly known as Anthem) recently created a carbon copy of Optum that houses its small group of providers and PBM.

“They all have United envy,” Taylor said.

UnitedHealth executives say owning or partnering with providers will benefit patients because their care will be more coordinated without sacrificing quality. And the company still contracts with many other providers. But the incentives to drive people toward its own providers raise concerns about if, at some point, networks will get tighter, and if patients will have to pay more to see the doctor they want.

“What if you don’t have UnitedHealth insurance, and your doctor or local ambulatory surgery center becomes acquired through Optum? Will you have access to that same provider?” said Christopher Whaley, a health economist at RAND.

Critics also worry UnitedHealth’s buying spree could give it a stranglehold on certain types of care in certain markets, but these types of deals would continue to evade antitrust scrutiny.

Excluding UnitedHealth’s $13 billion buyout of Change Healthcare, the company has spent $8 billion so far this year on transactions, like the deals for Kelsey-Seybold and Atrius. UnitedHealth did not distribute official press releases for any of the deals and doesn’t have to disclose many specifics because the sizes of the deals are small relative to the company’s behemoth size.

“The big problem with all of this vertical integration and further consolidation is it’s reduced competition,” Damberg said. “I feel like the race is still on before the regulators can catch up.”


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