Diving overview:
- A recent study reveals that UnitedHealthcare compensates its affiliate, Optum, 17% more than it does other healthcare providers. This finding has raised concerns for critics about the implications of vertical integration, especially regarding UnitedHealth, which owns both entities.
- In regions where UnitedHealthcare holds a minimum of 25% market share, this figure escalates to 61%, according to research published in Health Affairs.
- The researchers assert that these findings indicate UnitedHealth might be bypassing rules intended to prevent insurers from gaining undue advantages in the insurance market. UnitedHealth, however, contests this claim, asserting that it pays Optum similar rates to other providers.
Dive Insight:
There’s a growing focus among researchers, regulators, and lawmakers on vertical integration in healthcare. As more physicians are pushed out of independent practices into the realm of insurance firms, hospitals, and private equity, this issue becomes more pronounced.
While insurance companies employ fewer doctors than hospitals do, their influence over medical professionals has steadily grown. This raises concerns that insurers might be leveraging their ownership to sidestep regulations aimed at controlling profits.
A study conducted by experts from Brown University and the University of California, Berkeley, scrutinized government price transparency data to investigate practices involving UnitedHealth. It’s worth noting that other healthcare companies, like CVS and Humana, also have integrated structures.
Optum ranks among the biggest physicians’ employers in the U.S., managing over 90,000 affiliated or direct physicians, while UnitedHealthcare stands as the largest private insurer in the nation.
The study specifically examined frequently performed costly procedures, comparing payments made to Optum providers for commercial members in 2024 against those from major competitors like Aetna, Cigna, and Blue Cross Blue Shield.
Overall, UnitedHealthcare’s payments to both Optum and non-Optum providers surpassed those made by rival insurers (62% and 38% more, respectively). Findings indicate that UnitedHealthcare offered 17% higher payments for Optum services last year compared to other payers.
The researchers suggest this might indicate that UnitedHealth is misusing medical loss ratios (MLRs), which assess the percentage of premiums spent on patient care.
Under the Affordable Care Act, insurers are mandated to allocate at least 80% of premiums for individual and small group plans and 85% for large groups towards patient care. If they fall short, they are required to refund the difference to members.
Experts posit that major insurers might have created a complex financial structure to navigate these requirements. By channeling patients to their own providers, insurers essentially fund their own services, which allows them to funnel premium dollars into another business segment. This setup makes it appear that premiums are indeed being invested in patient care, keeping the MLR compliant even though funds remained within the company.
Notably, in markets where UnitedHealthcare claims at least 25% control, the reimbursement for Optum physicians surged to 61% beyond that received by other practitioners.
The researchers argue that because MLR regulations could restrict profits in areas with lesser competition, UnitedHealthcare has a vested interest in boosting payments to Optum physicians in those regions.
As UnitedHealth Group expands its reach into physician practices and pharmacy services, it’s crucial to monitor their activities, especially in less competitive markets, as intercompany transactions can obscure monopolistic profits and hinder regulatory oversight of MLR compliance.
However, it’s important to note that the study had limitations. It examined only a subset of pricing data, potentially overlooking factors that might clarify whether reimbursements were high or low.
Additionally, there were fewer instances of UnitedHealthcare compensating Optum compared to other categories. Payments made to UnitedHealthcare by Optum constituted under 0.2% of the total sample, and the researchers themselves admitted that their findings “may not be generalizable” to broader payment practices.
In defense of their stance, UnitedHealth pointed out these study limitations, arguing that if it truly compensated Optum 17% more than other providers, competitive and actuarially sound plans wouldn’t be viable.
“UnitedHealthcare compensates Optum Health on par with any other market provider that is essential for maintaining competitiveness. This study, funded by biased entities, cherry-picked data, and is fundamentally incorrect,” the company stated.
This study isn’t unique in uncovering a correlation between UnitedHealthcare and heightened payments to Optum. Last November, a statistical bureau report found that 13 of 16 companies analyzed showed UnitedHealthcare paying Optum practices more for common services compared to other in-network providers in the same region.
Currently, UnitedHealth is facing both criminal and civil probes by the Department of Justice over suspicions regarding its profits gained through controlling the healthcare market, particularly concerning its relationship with Optum.
