Big Business Hearts Big Government: Insurance Giants Get Rich On ObamaCare

GettyImages-456748790

One of the myths that always needs bursting is that Big Business hates big government’ regulations, and supposedly prefers small-government Republicans to keep Uncle Sam off its back.

In reality, Big Business loves Big Government because mega-corporations can use their lobbying clout to get subsidies for themselves and regulatory burdens on their rivals.

But it is a basic reality that heavy regulations hurt smaller companies more, even when they are, in theory, applied evenly.  Big companies can absorb expenses and compliance costs more easily, they tend to be more adaptable, and they can afford the analytical firepower to find profit opportunities hidden in complex regulatory mazes.

The latest demonstration of the principle is ObamaCare, which is absolutely devastating small insurance companies, and driving those fabled insurance co-ops out of business like lemmings marching off the edge of a cliff… but the biggest of the big players are doing fine.

In fact, as The Economist notes, even though the biggest of the big five companies, UnitedHealthcare, is having serious second thoughts about losing money on the Affordable Care Act exchanges, the share prices of those top five companies – also including Aetna, Humana, Cigna, and Anthem – “have all roughly tripled over the past five years,” as these companies have remained “consistently and highly profitable.”  All of them are expected to report record profits over the next few years.

The Economist goes on to explain why:

The results [is that] most financial firms may have buckled under the weight of new regulation, but health insurers appear to be thriving in the complicated new regulatory environment.

When firms like Cigna and Aetna sold off other insurance businesses in the 1990s to concentrate on health care, it seemed that the dynamic businesses were being divested, leaving lumbering rumps. But in America, at least, health care turns out to be the most exciting corner of the industry. The vast expense and unintelligible complexity of American health care may be a national disgrace, but they are a huge opportunity for firms that can navigate the system and minimize costs.

Among those opportunities are Medicaid and Medicare, which both have a growing base of beneficiaries.  Medicaid, expanded dramatically by ObamaCare, is a management nightmare that state governments are proving all to willing to hand over to private contractors.  Funny, the Left rails constantly against the evils of privatization… but the biggest Big Government program in modern history stuffed Medicaid like a Thanksgiving turkey, and then carved it up into chunks for the delectation of huge corporations.

Another results of ObamaCare is ongoing consolidation, as the big players snap up smaller companies that can’t survive in the new environment. One of the big reasons Big Business loves Big Government is that draconian regulations make it very difficult for young competitors to enter crowded markets to do battle with the old dragons, a mechanism the Economist finds very much at work in the post-ACA health insurance industry.

In a time when “too big to fail” is an epithet, and Americans have been told businesses need to get smaller while the government grows without limit, ObamaCare has created an medical sector where consolidation is inevitable, because only the huge can survive.  That’s very different than what liberal voters probably expected from the great liberal “triumph” of the Obama years… and bears not the slightest resemblance to the world of increased competition and flourishing choices Obama promised the American people.

COMMENTS

Please let us know if you're having issues with commenting.