We didn’t need the murder of an insurance company executive to tell us America’s health care system is broken. Researchers, journalists, and activists have been chronicling its failures for years—the exorbitant costs, the middling outcomes, the inhumane and nonsensical complexity of it all. The need for vast improvement is something even health care executives will freely admit.
The system wears people down, which is maybe why, even in an election year, it has been largely absent from the public discourse. That is, of course, until UnitedHealthcare CEO Brian Thompson was murdered last week in midtown Manhattan by a gunman who had inscribed shell casings with the words “Delay,” “Deny,” and “Depose,” apparent references to tactics the insurance industry is accused of using to boost profits.
In the days since, those three words—likely inspired by the title of Jay Feinman’s 2010 book, Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It—have been giddily printed on merchandise (including Delay, Deny, Depose Christmas ornaments) and unfurled on banners over freeways in Baltimore and Chicago. It’s a mantra that has come to symbolize the rage many feel toward the insurance industry, and its perceived tendency to prioritize profits over patients. For people who haven’t experienced an insurance nightmare themselves, there have been plenty posted online to infuriate them: ghastly letters and testimonials about patients being denied surgery for breast cancer, diabetes medications, or other vital care.
Luigi Mangione, a 26-year-old man with a history of treatment for back pain, was arrested on Dec. 9 and charged later that day with Thompson’s murder; among Mangione’s possessions at the time of his arrest were writings decrying corporate greed.
Public anger has hung on the narrative that companies like UnitedHealthcare have gotten rich by denying claims. While those situations, whenever and however they occur, are frustrating, that’s an overly simplistic and narrow understanding of these businesses and the role they play in the broader health system.
There’s no question that health insurance companies routinely delay and deny care, through processes like “prior authorization”—requiring the sign-off of an insurer before a patient can receive medical care—and the denial of claims. But insurers argue that there’s good reason for these practices: In America’s $4.5 trillion health care industry, they serve as important checks to a system that is riddled with overpriced and unnecessary care. Hospitals, physician groups, and drug manufacturers, insurers argue, all have incentives to maximize profits at the expense of the patient. Rather than causing harm, insurers see their processes as necessary tools to protect patients, plan sponsors, and the broader system.
Andrew Witty, the CEO of UnitedHealth Group, the corporate parent of UHC, said as much in a video address to his 440,000 employees in the days after Thompson’s killing. “Our role is a critical role,” he told them. “We make sure that care is safe, appropriate and is delivered when people need it, and we guard against the pressures that exist for unsafe care or for unnecessary care to be delivered in a way which makes the whole system too complex and ultimately unsustainable.”
In the video, leaked on X, Witty looked stricken. He remarked on the negative coverage and vitriolic comments that had followed Thompson’s death (which have included “wanted” posters of healthcare CEOs, and online humor romanticizing the suspect). And he encouraged employees “to tune out that critical noise…It does not reflect reality, it is simply a sign of an era in which we live.”
Still, there’s no denying that this consumer anger comes in an era that has seen health insurers rise to incredible dominance. Over the past 30 years, the biggest health care companies have become truly huge: They now make up eight of the 25 biggest companies in the U.S. by revenue, up from zero in 1995. None is bigger than UnitedHealth Group, which brought in $372 billion in revenue in 2023. As these companies readily acknowledge, they’ve pursued this massive scale—through acquisitions and diversification across health care—precisely so that they could become more efficient, and thus more profitable. They say their size positions them to deliver better health outcomes for lower costs. But the delay and denial that generate so much frustration and distrust among patients are vital elements of that efficiency toolkit.
Thompson’s killing was a shocking and senseless tragedy, and one can draw many conclusions from the uglier public reactions to it. But certainly it has awakened an important conversation about our flawed health system. Failing to reckon with the widespread consumer frustration with the industry misses the point: The deeper underlying question is whether bigger is better.
Low margins, but big profit numbers
One can understand the feeling that the health system is rigged against us. Medical care in America is extremely expensive—even for people with insurance. This year, the average premium for family coverage Is $25,572, up 7% over the previous year for the second year in a row. (Employees, on average, contribute $6,300 of that, though many are required to contribute much more.) Many customers also have deductibles to meet before their insurance kicks in—ranging from $2,700 to $5,000 for families.
Health insurance is supposed to protect people from financial hardship, but because of these growing costs, it has become another force economically squeezing Americans. A study published in November by the Commonwealth Fund, a nonprofit research group focused on health care issues, found 23% of people are “underinsured,” meaning they have coverage but they can’t afford to access it. And 57% of underinsured adults avoid getting needed care due to cost.
The high cost of insurance makes it even more galling when insurers deny urgently needed care, notes Commonwealth’s Sara Collins, a senior scholar and VP of health care coverage and access. “In addition to the health crisis that they’re facing, and the extreme fear that can accompany that situation, they’re also dealing with the financial issue that they assumed was taken care of because they had insurance.” Roughly six in ten Americans have experienced problems with their health insurance, according to a 2023 survey from KFF, a nonprofit health policy research, polling, and journalism organization. (Curiously, 81% of these respondents also rated their insurance as “excellent” or “good.”)
The fortunes of companies in America’s $4.5 trillion health care industry, meanwhile, look comparatively robust. The sector now accounts for nearly 17% of GDP, and dominates corporate America. As we wrote last year, soaring spending and relentless consolidation help explain this trend, which has put five health insurers in that group, with UnitedHealth Group at the very top.
In his “manifesto,” Luigi Mangione seems to have singled out United in part because it was big—the fourth largest company in the U.S. “It has grown and grown,” he wrote, before noting that life expectancy in America had not.
It’s true that UHG has become particularly huge. Since 2010, when the Affordable Care Act (ACA) was signed into law, the company has transformed itself from an $87 billion insurer—the nation’s 21st-largest company—into an almost full-service, vertically-integrated health care juggernaut. Beyond its large insurance business, UHG also owns, among other things, a pharmacy benefits manager (PBM), surgical clinics, home health providers, and the nation’s largest physician group. It owns the nation’s main claims processor, Change Healthcare, which was hacked this spring, bringing down much of the nation’s healthcare payment infrastructure for weeks. In total, its $372 billion in revenue last year made it, yes, America’s fourth largest company—but also, staggeringly, the eighth largest corporation in the entire world.
The business Thompson led, UnitedHealthcare, is the insurance division of that larger company—and the source of the lion’s share of its revenue. With $281 billion in revenue, UHC would be America’s ninth-largest if it were a standalone company.
How has UHC gotten so big? Mostly by adding members: Since 2010, UHC has increased the number of people enrolled in its health plans from 32 million to 53 million. A sizable chunk of these beneficiaries are in government-sponsored programs such as Medicare Advantage. Some 40% of UHG’s revenues came from the Centers of Medicare and Medicaid Services in 2023, up from 27% fifteen years ago.
UHG made $22 billion in profit in 2023, more than all but 11 other companies in the U.S. That’s a massive number, but it also needs to be put in perspective. Last year, both UHG and UHC reported margins of roughly 6%. (The median for companies in the Fortune 500 is 7.2%.) Margins for the other large insurers were slimmer: Elevance at 3.5% (#348), Cigna at 2.6% (#377), and CVS Health at 2.3% (#391). On the one hand, those margins pale beside the astronomical profits of the tech sector—where companies like Meta, Microsoft, and Alphabet routinely deliver 30-40% margins. Still, those health care giants all booked billions in profits because of their enormous scale.
Insurers do spend less, and thus increase profits, when they deny claims. But their profits are limited in a way most industries’ aren’t: The authors of the Affordable Care Act recognized that incentive and created a regulation designed to prevent its abuse. By law, insurers must spend at least 80% to 85% percent of premium dollars on care. (In other words, they can’t put more than 15%-20% toward administration, marketing expenses, or profit.) If the insurer spends less than required on care, it must refund the excess premium to customers. In theory, the regulation removes the incentive to skimp on coverage (at least to a point), and it effectively caps the industry’s profitability.
As is the case with many things in health care, that well-intended rule may have had some unintended consequences. Insurers, UnitedHealthcare especially, turned to other businesses to find fatter margins. It started the industry’s arms race of acquisitions and vertical integration that has left us with the highly consolidated, even higher cost health care ecosystem we have today. UHG is of course still making plenty of money in its insurance business, but its more profitable venture is Optum, the company’s health services arms that it has been building up ever since.
How ‘managing costs’ becomes ‘delay and deny’
Health insurers work on behalf of health plan sponsors—employers, or in the case of Medicare and Medicaid, state and federal governments. They collect premiums for each member, and they pay out health claims from that collective pool. Those premium dollars are not infinite, and thus much of an insurer’s work is managing costs. Prior authorizations and denying claims are among the tools they use to do it.
It can seem heartless to think of health care in terms of dollars and cents, but the rising cost of health care—which insurers say they’re working to guard against—is not trivial. And affordability of care is a health issue, too: When you don’t have the money to spend on a doctor’s visit or get a medical procedure—as is the case for many underinsured and uninsured Americans—you risk suffering greater harm.
“What insurers are trying to do is keep healthcare costs low so that they can offer lower premiums,” says Cynthia Cox, VP and director of the Program of the ACA at KFF. “If they let anyone get any health care that they wanted, regardless of whether it was needed or not, then premiums would go up and up.”
While the cost burden on patients can be significant, they only pay for a fraction of the total bill. America’s employers (through the health insurance plans they offer) and the state and federal governments (which fund Medicare and Medicaid) shoulder the vast majority of costs. Of course, that spending ultimately hits people too in the form of lower wages or in taxes.
“People pay for health care one way or another,” says Cox.
It’s hard to know just how often health insurers are requiring prior authorization or denying coverage. As ProPublica explained last year, the information remains closely guarded by companies and regulators. But some data has been reported on Medicare Advantage, the government’s privatized Medicare program, that indicates the practice is widespread. According to KFF, 99% of all Medicare Advantage enrollees are required to get prior authorization for services including inpatient hospital stays and chemotherapy. In total, more than 46 million prior authorization requests were submitted to Medicare Advantage insurers in 2022, about 1.7 per enrollee. And 7.4%, or 3.4 million, of those requests were denied. Of course that’s just one of the health care system’s myriad programs.
Patients have a right to appeal these decisions, but few do—just 10%, according to KFF’s surveys. The reasons speak to the complexity of the system: Patients don’t realize they have a right to challenge the denial, or they don’t know how, or they don’t have time. It’s a dismal reality, particularly given that 83% of appeals are successful, according to KFF.
The insurance industry bristles at the idea that they deny claims out of self-interest. Representatives stress they simply administer health plans according to the terms set by the plan sponsor and note that many claims are rejected because physicians submit incomplete or incorrect information—in other words, bureaucratic reasons over which a patient has no control.
Other reasons claims may be denied often relate to a plan’s cost-saving measures and members not fully understanding their coverage. For example, insurers will cover only in-network providers, or they will opt to pay for a low-cost generic drug rather than a more expensive branded one.
But, whether they’re intended to or not, the reality is that the industry’s bureaucratic hurdles do sometimes harm patients. A survey by the American Medical Association found 24% of physicians reported that the prior authorization process led to an “adverse event” for a patient in their care. KFF found in its 2023 survey that 16% of people experienced a problem with prior authorization. Of those, 34% couldn’t get recommended care; 32% experienced significant delays; and 26% said their health declined as a result. A 2023 Commonwealth Fund survey meanwhile found that 17% of people said their insurer had denied medical treatment that a doctor had recommended. Sixty percent of those individuals said this delayed their care, and roughly 50% reported their health suffered as a result.
A recent Senate report revealed how insurers including UHC had increasingly denied Medicare Advantage enrollees access to post-acute care. The authors accused the companies of “using prior authorization to protect billions in profits while forcing vulnerable patients into impossible choices.”
It’s just one of the ways that the system is failing patients. When you cut through all the complexity of the system, the bottom line remains starkly simple: The United States pays roughly twice as much as comparably wealthy countries on health care, and our life expectancy is nearly five years less. Quite simply, we’re not getting what we pay for—even as the industry builds huge businesses around what we pay.
This story was originally featured on Fortune.com