A Veteran U.S. Physician Explains How the Affordable Care Act (Obamacare) Effectively Lets Health Insurers Extract Unlimited Profits from Taxpayers
Here’s the core mechanism in plain English, straight from a doctor with four decades of experience:“The reason your health-insurance premiums keep rising every single year—by double-digit percentages some years—isn’t an accident. It was baked into the design of the Affordable Care Act.The ACA created something called the Medical Loss Ratio (MLR) rule.
It sounds consumer-friendly: insurance companies are required to spend at least 80–85% of every premium dollar on actual medical care (the “medical loss” in insurer lingo). That leaves them only 15–20% for administration, overhead, and profit.On paper, that caps their profit. In reality, it does the exact opposite—it guarantees ever-growing profit—because insurers figured out two brilliant loopholes:
Loophole #1: Just raise the top line
If you’re allowed to keep 15–20% of whatever number you want, the simplest way to make more money is to make the total number as large as possible.\
So every year, insurers simply increase premiums far beyond what medical costs actually rise. A bigger pie means a bigger allowed slice for themselves, even if the percentage stays the same. And because the MLR is calculated on the inflated premium, it’s perfectly legal.Result: insurer revenue and profits climb relentlessly, year after year.
Loophole #2: Vertical integration + creative accounting
Insurers went on a buying spree after Obamacare passed. Today the biggest ones (UnitedHealth, CVS/Aetna, Cigna, etc.) own:
- Pharmacy benefit managers (PBMs) – the middlemen who negotiate drug prices
- Giant pharmacy chains
- Thousands of doctor practices, clinics, and urgent-care centers
Why does owning all these entities matter? Because now the insurer can shift money around inside its own corporate family and still count it as “medical spending” under the MLR rule.
Example:
- The insurance side of the company overpays its own captive physician group $500,000 for services that should cost $300,000.
- That extra $200,000 looks like “medical care” on the insurance division’s books (helping it hit the 80–85% MLR target and avoid rebates).
- But the money never leaves the parent company—it just moves from one pocket to another.
Same trick with drugs:
- A medication that truly costs $50 can be billed internally at $250 through the insurer-owned PBM and pharmacy.
- The insurance division records $250 of “medical loss.”
- The extra $200 stays inside the same conglomerate.
The government’s MLR enforcement stops at the insurance company’s border. Regulators never trace where the dollar goes after it leaves the insurer, even when it lands in another subsidiary of the same corporation.
The bottom line
These two maneuvers—endlessly inflating premiums + laundering profit through owned providers and PBMs—turn the Medical Loss Ratio from a consumer protection into a government-guaranteed profit escalator.
And that’s why your family’s health insurance keeps getting more expensive every year, even when inflation is low and you’re healthy. And it will keep rising indefinitely until the system is fundamentally changed.
As this doctor puts it: “They’re not breaking the rules. The rules were written in a way that lets them do this legally—and the taxpayers foot the bill.”