President Donald Trump has claimed that under the Affordable Care Act, insurance companies have “taken advantage of this country” and “made a fortune,” which he “stopped” by ending payments for cost-sharing subsidies on the ACA marketplaces. That’s misleading, at best, for several reasons.

Health insurers have made money – an increase in net income of 46 percent from 2015 to 2016 – according to a report from the company A.M. Best. But that was in spite of, not because of, the ACA marketplaces. “They did lose millions and millions” in Obamacare, Doniella Pliss, associate director at A.M. Best, told CNN Money.

Trump pointed to the increased stock prices of four companies, but two of them, Humana and Aetna, pulled out of the ACA marketplaces for 2018. The other two — Anthem and Cigna — have pulled out of some states and counties.

The ACA limits the amount of profit insurers can make. At least 80 percent of premiums must go toward covering health costs. The rest can go toward administrative costs, profits, marketing and salaries. If insurers don’t meet those requirements, they have to issue rebates to consumers. The rebates totaled $400 million in 2015, with $107 million of that going to consumers on the individual market.

Insurers should actually do well because of Obamacare – millions have gained insurance. But insurers say they’ve had to increase premiums, as Trump has reminded voters, in order to cover the costs of a sicker pool of consumers than expected.

On Oct. 12, the Trump administration announced it was “immediately” cutting off payments to insurers for cost-sharing subsidies available through the ACA marketplaces. As we have explained before, while the government payments go to the insurance companies, the money reduces the out-of-pocket insurance costs for low-income individuals.

These cost-sharing subsidies are separate from the premium tax credits available under the ACA that lower the cost of premiums for those earning between 100 percent and 400 percent of the federal poverty level. The cost-sharing subsidies are for those who earn between 100 percent and 250 percent of the federal poverty level, and the subsidies reduce the amount policyholders have to spend on deductibles, copays and coinsurance. The tax credit and subsidy are only available for policies purchased on the ACA marketplaces, such as HealthCare.gov.

Under the ACA, the insurance companies are required to sell policies with these lower out-of-pocket costs to those who qualify, based on income. The government then sends the subsidy payments to the insurers, reimbursing them for the cost of the discounted coverage.

The Congressional Budget Office estimated in January that the cost-sharing subsidies would total $10 billion in fiscal 2018, which began Oct. 1. The Centers for Medicare & Medicaid Services said that 57 percent of the 10.3 million people who had paid for ACA marketplace plans early this year had received cost-sharing subsidies.

The president has cast his decision to cut off the subsidies as one that hurts insurance companies, calling the payments “bailouts” — a claim we’ve fact-checked before. He has gone on to say that companies have made a “fortune” because of the Affordable Care Act.

Before a cabinet meeting on Oct. 16, Trump described the cost-sharing subsidies as a “gift” to insurance companies. “Take a look at where their stock was when Obamacare was originally approved and what it is today,” he said.

“And the gravy train ended the day I knocked out the insurance companies’ money, which was last week,” he went on to say. “Hundreds of millions of dollars a month handed to the insurance companies for very little reason, believe me. … I want the money to go to poor people that need it.”

On Oct. 18, he tweeted about Sen. Lamar Alexander and his bipartisan work with Democratic Sen. Patty Murray to craft legislation that would continue the cost-sharing subsidies for two years, among other measures. He claimed insurers have “made a fortune w/O’Care.”

I am supportive of Lamar as a person & also of the process, but I can never support bailing out ins co's who have made a fortune w/ O'Care. — Donald J. Trump (@realDonaldTrump) October 18, 2017

The Washington Post Fact Checker highlighted another comment Trump made to a reporter from E.W. Scripps on Oct. 17. The president cited numbers for increased stock prices of Anthem, Humana, Aetna and Cigna “from the beginning of Obamacare,” and then said: “The insurance companies have absolutely taken advantage of this country and our people. And I stopped it by stopping the CSRs,” meaning “cost-sharing reductions.”

Trump earned four Pinocchios from the Fact Checker. We’ll take a look as well at whether insurers have “made a fortune” and what the cost-sharing subsidies might have to do with that.

Insurance Companies’ Profits

Health insurance companies are indeed profitable. As we said, A.M. Best, a firm that provides analysis and credit ratings of the insurance industry, issued a report this summer saying that the health insurance industry’s net income increased by 46 percent from 2015 to 2016. The industry made $13.1 billion.

But that wasn’t because of the ACA marketplaces, where the cost-sharing subsidies apply. Insurers largely made their increased profits on Medicare Advantage plans.

A.M. Best said in its report that an overall underwriting loss in the commercial segment was “primarily” due to the individual market and the ACA marketplaces — and that was due to “severe adverse selection,” or a risk pool that wasn’t balanced between healthy and high-cost individuals.

A.M. Best, June 14, 2017, report: The commercial business reported an overall underwriting loss of $893 million, but this was a marked improvement over the $2.1 billion underwriting loss reported in 2015. The negative results were due primarily to the individual segment—in particular, to the Patient Protection and Affordable Care Act (ACA) exchange products—owing to severe adverse selection and the inability to effectively manage risk pools. The improvement in the segment’s financial results followed very high rate increases, the modification of plan designs (including a reduction in the number of plans available with out-of-network benefits), and more effective medical management.

CNN Money reported that Doniella Pliss, an associate director for A.M. Best, said that Obamacare “is not eating into profits to the degree that it did in the prior year.” But insurers still lost “millions and millions” in that area in 2016.

Pliss said that “it doesn’t contradict the fact that they did very well in other lines of business.”

The ACA also limits how much profit insurers can earn on premiums, under what’s called the medical loss ratio, or MLR, provision. The health care law requires that at least 80 percent of premiums be spent on medical claims and quality improvement, with the other 20 percent for profits, salaries, marketing and overhead (it’s an 85/15 split for large group, or large employer, plans).

Health insurers are required to file yearly reports with the Centers for Medicare & Medicaid Services on their profitability, and if they don’t meet the MLR standards, they have to issue rebates to consumers. Consumers on the individual market were owed $107 million in rebates in 2015 and $238 million in 2014.

The National Association of Insurance Commissioners sent us data showing that insurers reported an underwriting loss of $4.7 billion in 2016 on the individual market, which would include plans sold on and off the ACA marketplaces.

That’s the same figure in a report from the consultancy group Oliver Wyman, which also cited losses for insurers on the individual market of $6 billion in 2015 and $3.6 billion in 2014.

So, instead of making “a fortune w/O’Care,” the insurance companies overall lost money on it.

Several insurers have cited those losses as the reason for withdrawing from ACA marketplaces. In fact, Trump has tweeted about it.

In February, he noted “Humana to pull out in 2018,” and in May, he claimed, “Ocare is on its last legs and that insurance companies are fleeing for their lives.” In August 2016, he linked to a news report on Aetna planning to leave most of its ACA marketplaces. “Another health insurer is pulling back due to ‘persistent financial losses on #Obamacare plans,'” he said.

Another health insurer is pulling back due to 'persistent financial losses on #Obamacare plans.' Only the beginning! https://t.co/YqfaEvg8c3 — Donald J. Trump (@realDonaldTrump) August 16, 2016

Yet now, the president claims that those same insurers are doing well with the ACA.

Trump told E.W. Scripps reporter Mike Sacks that Aetna, Humana, Anthem and Cigna have seen big gains in their stock prices under the ACA. “The insurance companies have absolutely taken advantage of this country and our people,” he said. “And I stopped it by stopping the CSRs.”

But Aetna pulled out of many ACA marketplaces this year and announced that it won’t participate in any of them in 2018. Humana, too, announced early this year that it would exit the marketplaces, as Trump accurately tweeted at the time.

Anthem is still participating but has reduced the states or counties in which it offers ACA plans. The insurer has cited uncertainty over the future of cost-sharing subsidies as one reason for some of its market exits. Cigna pulled out of Maryland but still offers ACA plans in six states.

To be sure, insurance companies have done better in some states than others, and some companies are succeeding where others have withdrawn.

“The marketplaces are generally performing well,” Mario Molina, CEO of insurer Molina Healthcare, said on a 2016 company conference call. And the CEO of Centene said a year ago that it expected to continue to earn profits on its ACA policies in 2017, according to USA Today.

But overall, the industry has not “made a fortune” on Obamacare plans, as Trump claimed, and the withdrawal of the cost-sharing subsidies won’t “end the gravy train.”

The National Association of Insurance Commissioners said that insurers would lose more than $1 billion in payments owed for 2017 due to the elimination of the cost-sharing subsidies. But for 2018, many insurers submitted higher premium increases because they were uncertain whether the Trump administration would continue the subsidies. And Congressional Quarterly reported on Oct. 16 that the administration is allowing some insurers that didn’t account for that development to resubmit higher rates.

“Insurers in the vast majority of states on the federal exchange submitted rates for the upcoming plan year assuming that CSR payments would not be made, so no rate adjustment is needed,” Department of Health and Human Services spokeswoman Caitlin Oakley said in a statement, CQ reported. “CMS is working on a case-by-case basis with those states where regulators explicitly required insurers to assume CSR payments would be made.”

The nonpartisan Congressional Budget Office estimated that the average premium for the second-lowest cost silver plan would rise 20 percent in 2018 if the subsidies were ended. NAIC projected a slightly lower figure, saying that premiums would go up “by an additional 12-15 percent in 2018.”