United Health Group Inc. (UNH), WellPoint Inc. (WLP) and other health insurers will forfeit to consumers about $1.2 billion in 2011 profits because of changes to U.S. health- care law, a Goldman Sachs Group Inc. (GS) analyst estimated.
The rebates amount to about 5.7 percent of $21 billion in industrywide profit, Matthew Borsch, a Goldman analyst in New York, said in a note to clients yesterday. The 2010 health overhaul limits to no more than 20 percent the premium revenue insurers can keep for administrative costs and profit.
Eight publicly traded insurers, also including Bloomfield, Connecticut-based Cigna Corp. (CI) and Aetna Inc. (AET), would pay a combined $850 million of those rebates this year because they exceeded the limits, said Borsch, who used data filed to state regulators last week. The findings are “more positive than negative,” he said, as the government had forecast the industry would refund about $1.4 billion.
Rebates may be lower than expected because insurers “proactively” reduced their premiums to avoid paying back customers, Borsch said. His estimate doesn’t reflect waivers the government granted to insurers in seven states, allowing them higher profit limits, he said.