Should Health Insurance Be on Wall Street?
I am a capitalist.
I believe businesses should be able to innovate, compete, grow and earn a return on the value they create.
But health insurance is not an ordinary product. Patients cannot shop for care the way they shop for a car, a phone or a vacation. They often need care at the most vulnerable moments of their lives. In many cases, they cannot choose their insurer, cannot understand the insurer’s negotiated prices and cannot wait while two companies argue over who should pay.
I keep returning to an uncomfortable question: Would American healthcare be better without health insurers on Wall Street?
The Conflict Is Built into the Business Model
A publicly traded health insurance company has two constituencies whose interests collide.
Patients expect the company to pay for covered, medically necessary care. Investors expect growth, earnings and return on capital.
An insurer can improve its financial results in several ways. It can raise premiums, negotiate lower prices, improve operations, invest reserves, grow enrollment or sell additional services. It can also reduce what it pays for care.
That last lever is where the interests of patients and investors collide.
All else being equal, every avoided claim improves the insurer’s short-term economics. A denial may be appropriate when a service is truly experimental or inappropriate, a claim is coded incorrectly or care is not medically necessary. But an improper denial, an obstructive prior authorization process or a delay that causes a patient to give up can produce the same financial result: The insurer keeps money it otherwise would have paid.
That does not mean every insurer employee is trying to deny care. It means the system rewards lower medical spending even when the line between responsible utilization management and obstruction becomes dangerously thin.
The Numbers Show Why This Question Cannot Be Dismissed
KFF’s analysis of federal data found that insurers offering plans on HealthCare.gov denied 19% of in-network claims in 2024. Fewer than 1% of those denied claims were appealed. The analysis does not tell us that every denial was improper, and administrative denials may later be corrected. The findings show that denials are not rare and most are never challenged.
The federal government has found more direct evidence of inappropriate denials. The Department of Health and Human Services’ Office of Inspector General reviewed a 2019 sample of denials issued by 15 of the largest Medicare Advantage organizations. It found that 13% of denied prior authorization requests met Medicare coverage rules. It also found that 18% of denied payment requests met both Medicare coverage rules and the insurers’ billing rules.
In 2024, the Senate Permanent Subcommittee on Investigations reported that the three largest Medicare Advantage insurers used prior authorization to restrict post-acute care. UnitedHealthcare’s denial rate for post-acute care increased from 10.9% in 2020 to 22.7% in 2022 as the company expanded automated processes, according to the committee’s findings.
These are not abstract numbers. A delayed rehabilitation stay, infusion, scan or medication can change the course of a person’s disease.
What Happened When Nonprofit Insurers Became For-Profit Companies?
American health insurance did not begin on Wall Street. The early Blue Cross plans were organized as charitable organizations intended to serve their communities.
Beginning in the 1990s, a number of Blue Cross and Blue Shield plans converted to for-profit companies. That history gives us something close to a real-world test.
Economist Leemore Dafny studied conversions involving Blue Cross and Blue Shield affiliates in 11 states. In markets where the converting insurer already had substantial market share, fully insured premiums increased by roughly 13%. Rival insurers raised their premiums, too. The study found no net increase in medical spending per premium dollar and concluded that for-profit insurers were more likely than nonprofit insurers to exercise market power when they had it.
Research directly comparing health plan performance by ownership structure is surprisingly limited. One of the few national studies designed specifically to examine that question found that for-profit Medicare plans performed worse than nonprofit plans on measures including breast cancer screening, diabetic eye examinations, beta blockers after a heart attack and follow-up after hospitalization for mental illness. The age of the research raises its own question: Why, two decades later, do we still lack current national data showing how insurer ownership affects patient care?
Nonprofit Does Not Automatically Mean Patient First
We should be honest about the limits of the proposed solution.
A nonprofit insurer can build enormous reserves, pay executives generously, create narrow networks, require prior authorization and deny claims. It does not have shareholders, but it can still prioritize institutional growth, market dominance or executive compensation over patients.
Nor would removing insurers from the stock exchange eliminate every profit motive. A privately held insurer can pursue profit just as aggressively as a publicly traded one.
The Affordable Care Act requires insurers in the individual and small-group markets to spend at least 80% of premium revenue on medical care and quality improvement. Large-group insurers must spend at least 85%. If an insurer falls below the threshold, it must rebate only the shortfall. That is repayment, not a meaningful financial penalty. The insurer faces no additional consequence and keeps the savings generated by reducing medical spending down to the minimum.
The rule limits how little insurers can spend on care, but it does not eliminate the incentive to spend less. In a vertically integrated corporation, medical claims may be paid to a pharmacy benefit manager, specialty pharmacy, physician group or other healthcare company owned by the same parent corporation. The payment counts as healthcare spending while the revenue remains within the conglomerate.
The scale of this consolidation is enormous. The Federal Trade Commission reported that the combined 2023 revenue of UnitedHealth Group, CVS Health, The Cigna Group and Humana exceeded $1 trillion — an amount equal to 22% of total U.S. healthcare spending.
The Better Question Is Not Simply “For-Profit or Nonprofit?”
The better question is: What obligations should come with the privilege of controlling access to healthcare?
If health insurers remain for-profit companies, they should not be regulated like ordinary corporations. They should be treated more like public utilities or fiduciaries entrusted with an essential service.
That would require:
Public reporting of denial rates, reasons, appeal outcomes and decision times for every line of business, not only selected plans
Meaningful financial penalties when insurers repeatedly deny care that should have been covered
Independent clinical review that is fast enough to help the patient before a delay becomes harm
Standardized prior authorization and claims rules across payers
Oversight of payments among affiliated insurers, pharmacy benefit managers, specialty pharmacies and provider groups
Limits on executive incentives tied to utilization reductions, denial savings or short-term earnings
Patient and practicing physician representation in insurer governance
A public-interest obligation that carries the same legal and operational weight as financial performance
I would support a serious national discussion about requiring health insurers to operate as nonprofit companies without shareholders. They could still earn more than they spend and maintain the reserves needed to pay future claims, but those dollars would remain in the organization rather than being distributed to investors. I would also support examining whether companies that receive hundreds of billions of dollars in public healthcare funds should be permitted to deliver quarterly returns to shareholders while patients and physicians fight for care that should have been covered.
But I would not stop at the word “nonprofit.”
Changing the sign on the door without changing the incentives inside the building will not fix American healthcare.
The test should be simple: When an insurer must choose between protecting a patient’s timely access to medically necessary care and protecting a financial target, which obligation comes first?
Right now, our system does not provide a reassuring answer.
👇🏻 COMMENT
Would American healthcare improve if health insurers could not be publicly traded or owned by publicly traded corporations, or would the same behavior continue under a different corporate structure?
#AmericanHealthcare #HealthInsurance #PriorAuthorization #HealthcareReform #PatientCare
