Insurance Company Profits

The American Prospect had an interesting article about the incredibly profitable  insurance industry. If not for the power of insurance float, the empire of Warren Buffett’s Berkshire Hathaway would not exist. Insurance float is the profit earned in the period of time between collecting premiums and before payouts to clients. The longer they delay paying out claims, or the more government mandates are reduced, the higher the profits for insurance companies.

Because of regulations on the industry, insurance companies have a significant interest in government. Influence is exercised through lobbying, which is paid for with the gobs of money that insurance companies make.

For health insurance in particular, the importance of establishing influence over government is magnified. This industry is astronomical in size, and much of the money comes from government programs. The stakes for their bottom line are so high that insurance companies believe they must have a say in the legislative process.

A report from the Center for Health & Democracy Education Fund found that health insurance industry donations made since 1999 to state and federal candidates and political parties through nine corporate PACS reached the staggering sum of $120 million. For 2026, the report’s authors expect donations to break the annual record of $17 million set back in 2022. This doesn’t even count the dark money routed through PACs that are undisclosed.

“We talk in the report about Frank Pallone, ranking member of the House Energy and Commerce Committee, who is a co-sponsor of Medicare for All but takes a lot of money from the health insurance lobby,” said Rachel Madley, one of the authors of the report. “He was chair and controlled the calendar from 2019 to 2023, but there was only one hearing on Medicare for All, and he never held a markup.”

Another thing health insurance companies engage in is fraud. The Medicare Payment Advisory Commission estimates that private Medicare Advantage companies will steal $76 billion from the federal government this year, in the form of “upcoding,” the process of making their patients look sicker than they are to inflate reimbursements. Congress is well aware of these overpayments, yet it’s done nothing to stop them. The flow of corporate PAC donations is likely a major reason why.

Some of the biggest recipients of health insurance industry cash in Congress are party leaders. Because they control the voting calendar, they can halt reforms for years, even if they have wide support.

For instance, a bill called the Improving Seniors’ Timely Access to Care Act aims to reform prior authorizations, a frequent impediment used by Medicare Advantage. The bill currently has a supermajority of co-sponsors in both chambers, yet cannot get a vote.

“When they enter leadership they get a huge rise in donations,” Madley said of those who control the vote calendar. She cited House Speaker Mike Johnson (R-LA), who has taken $150,000 in PAC money since his 2023 election to his current position. The same dynamic is apparent for party leaders across the aisle, as Hakeem Jeffries (D-NY) has been given $88,000 by industry PACs and Katherine Clark (D-MA) has received over $100,000.

However, the great leverage that the health insurance lobby has in our political system does not always prevail. While many health insurance companies have effectively merged pharmacy benefit managers, the middlemen that drive drug prices higher, Ohio and Kentucky successfully threw out PBMs from their state Medicaid programs. In addition, Arkansas and Tennessee banned PBMs from owning retail pharmacies in a move that clearly targeted CVS, which owns Aetna and its own PBM Caremark. Even Congress passed a PBM reform law that bans so-called “spread pricing,” where PBMs charge different rates to health plans and pharmacies and pocket the difference. Several other promising state reforms have passed as well.

“The health care crises that we are in are so devastating, and crushing so many people, that a lot of people are realizing that this system has to change and can change,” Madley said. “It’s not going to be easy but we’re starting to move in the right direction.”