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Why Health Insurance Companies Shouldn’t Be Publicly Traded
Health insurance is one of the few industries where the product isn’t a good or a service — it’s a promise. And when that promise is tied to quarterly earnings calls, share buybacks, and activist investors, things get messy.
It’s time to ask a serious question: should companies that decide what care gets approved be listed on the stock exchange at all?
1. The Incentives Don’t Line Up
Publicly traded insurers have one job: grow earnings per share. That’s not evil — it’s just capitalism. But in this case, EPS growth often comes from:
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Pushing medical loss ratios lower (spending less of each premium dollar on actual care)
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Delaying or denying expensive treatments
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Narrowing networks or shifting more cost to consumers
When cost control is the primary lever to hit Wall Street expectations, you get decisions driven by quarterly guidance rather than long-term health outcomes.
2. Patients Aren’t Really “Customers”
In a normal market, you can switch to a competitor if you don’t like the service. Health insurance doesn’t work that way — coverage is often tied to your employer, state exchange, or government programs. That makes consumers a captive audience, which means they have less leverage when networks shrink or deductibles rise.
For a publicly traded company, that’s great: predictable premium revenue. For the insured? Not so much.
3. Wall Street Supercharges Consolidation
The biggest managed care companies — UnitedHealth, Cigna, Elevance, CVS/Aetna — have used their market caps as currency to acquire physician groups, PBMs, and data platforms. The result: vertically integrated ecosystems that control everything from your doctor visit to your prescription refill.
That may look efficient on paper, but it reduces competition and leaves smaller players unable to keep up. When a handful of companies control most of the market, choice becomes limited and switching carriers often just means moving from one giant to another.
4. Smooth Earnings, Rough Experience
Investors love health insurers because they throw off consistent cash flow. Managed care is considered a “defensive” sector — steady even in recessions. But the reason earnings are so smooth is precisely because these companies are so good at controlling medical spending.
That means the same levers that make them Wall Street darlings — tighter utilization management, cost sharing, aggressive contract negotiations — are the ones that make consumers feel like they’re paying more for less coverage.
5. There Are Other Models
This doesn’t mean healthcare has to be run by the government. Other frameworks exist:
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Mutual insurance models distribute surplus back to policyholders instead of shareholders.
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Nonprofit plans can reinvest into care delivery and service improvement rather than share buybacks.
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Regional cooperatives can compete on cost and coverage without having to chase quarterly EPS growth.
These models keep the focus on service rather than stock price performance.
6. Employers Are Starting to Push Back
Large employers — the biggest buyers of group plans — are starting to question whether they’re getting value for money. Some are experimenting with direct contracts with health systems or self-insured plans to bypass traditional carriers. If this trend continues, the publicly traded insurer model could start losing its biggest revenue base.
Healthcare Should Be a Long Game
Public markets are excellent at funding growth businesses — but health insurance isn’t really a growth business. It’s a risk-pooling business, and that makes it a poor fit for the short-termism of quarterly reporting.
Bottom line: the public-company model works beautifully for tech and industrials. For health coverage, it just misaligns incentives. A move back toward mutual, cooperative, or nonprofit models would keep the focus on service quality and cost predictability — not just next quarter’s margin.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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