Why Health Insurers Make Lousy Villains

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These numbers are misleading. If you look, (falsely), at a company as a separate physical entity from it's shareholders and executives, it's easy to see less profit than other companies might show. But counting bonuses among the costs of doing business discounts those recipients as part of the profitability.
So, it may be less "profitable" to invest in an insurance company than it is to invest in a pharmaceutical company, UNLESS you stand to PERSONALLY profit. It's dishonest to count these of-the-chart salaries and bonuses as "cost of business" and show lower profit for the company. A corporation ISN'T a stand-alone entity that is disconnected from it's management and shareholders, except where taxes, (and maybe liability), are concerned; it's made up of the INDIVIDUAL HUMANS who manage and INDIVIDUALLY PROFIT from it. I would venture to say that insurance ranks among the most profitable industries when this is taken, (properly), into account.

Dave of WA 1:31PM April 13, 2013

When you look at the %'s your argument is a good one, unfortunately for you we are smart enough to look at the amount of real dollar profits in the American Health care industry, and its far too high for Americans to afford!
The answer always from the business community, and government officials getting donations from the health care industry is to cut benefits without ever mentioning reducing the profits of the greedy American Health care system!! (millionaire doctors, multi billion dollar corporate hospitals, multi billion dollar corporate pharma., and multi billion dollar corporate medical suppliers!
The American Health care industry through there own greed has killed the golden goose in America!!
And isn't it just a bit evil putting profits into the conversation with life and death necessities like health care! Yes I said necessity!!!

Bob Bear of FL 8:12AM January 14, 2013

I am a wheelchair user with spastic Cerebral Palsy and I have a implanted medical device from Medtronic, and it has to be refilled every 40 days with a drug (baclofen). It costs $8000 EACH time the intrathecal drug pump is refilled, and that is one syringe pushed thorough the skin on my abdomen, to remove the old drug (about 10cc's), and then another syringe to fill it. And the cost of the pump itself? Expensive. But, it keeps my spasticity level down, and allows me to live relatively pain free. I am on traditional Medicare this year, due to a problem with my PCP (Personal Care Physician) and getting a Medicare Advantage plan that he would accept during open enrollment, so I'm paying 20% of that out of pocket. *sigh* Luckily, the hospital has a fund to help with that... otherwise, I would NOT be able to afford it, and I'd have to have the pump removed.

Dana Marshall of WA 8:11PM September 15, 2012

Kenny, please read the article carefully. Note the sentence, "Profit margins basically reflect the percentage of revenue left over after paying salaries, expenses, taxes and lots of other things."
We "libs" do know Econ 101. Profit is what is left over after ALL the overhead costs have been deducted.

Skipb48 of MI 2:53PM August 20, 2011

If Germany is so great, Charles of NY, why don't you apply to immigrate? There are numerous flights to Frankfurt every day. I notice that you didn't mention that Germany's corporate tax rate is much lower than ours at 15%. And by the way universal single payer run by the government is most decidedly NOT capitalism.

Waynester of GA 9:55AM July 30, 2011

All these big and small health insurance companies have thousands and thousands of executives, clerks, info techs, actuaries and etc., etc., basically doing the same things across companies. There would likely be tremendous economies of scale with a single payer system, where one set of employees would do it all. After all, that's a prime reason private companies merge. Sure, there would be some government waste, but not enough to equal all the expensive wasted duplicated salaries of the hundreds (thousands?) of private companies. And speaking as someone who has worked for large corporations both before and after mergers, there is enormous waste there also. Enough to make you laugh - or cry.
Question: Since when has Germany had public universal health coverage?
a) 1975
b) 1951
c) 1936
d) 1870
Answer: d
Not only that, but their dynamic economy is decidedly not in recession. And they are weaning themselves from nuclear power. We could learn a few things from the Germans. They may have committed the worst crime in history, but on the other hand they are now showing the way for a capitalist society to do the right things for its people and thrive in the 21st century. They have cooperation between government and industry that goes far beyond the stale cliches that American politicians fight and gridlock over, and that undergirds perhaps the strongest capitalist economy in the world.

Charles of NY 10:45AM June 14, 2011

PROFIT, and I cant believe we are doing remedial economics, is the money left after ALL of your bills are paid, after ALL of the costs of running the business have been deducted. I dont understand how you are trying to claim 13 to 17 percent profitability, so these businesses are not supposed to pay data entry persons, mail clerks, postage, managers, seriously, how do you expect them to stay in business providing the services they provide and employing the millions of americans they employ. If all they pay out in wages is 10-14 percent of what they bring in I'd have to say thats pretty lean, most restaurants pay 18-25 percent of what they take in on wages and thats just for the individual store location that doesnt include the wages paid to the executives running the company. You libs are unbeliveable and should probably try managing a business for a while so you can get a clear understanding of profitability, or take some entry level economics classes at you local community college.

Kenny of FL 11:51PM June 04, 2011

Ever heard of fuzzy math? Unless I missed the obvious - which I can - that's what you have. If, under the old rules, 25% of revenue is left for profit, you then extrapolate a 13% profit margin of total revenue as an "actual" margin. When in fact, it is six of one and half the other. A dollar amount is what was outlayed and a dollar amount was kept. These two values are equal. What you compare them to has changed to make your argument. What I find to be important is the fact this industry is demanded to spend a minimum amount in services. Which begs the obvious question. Where else has socialism profited enough to produce competition and inovation?

Steve of ME 9:15PM May 23, 2011

Profit margins are exactly what they sound like, they are what's left over after all the expenses, so it doesn't matter if we're talking about $10 or a billion, 3.4% is 3.4%. Look at it this way, if the average family is paying $10,000 per year for coverage, then $340 goes to profit, big deal, your share of the national debt is $46,000, so for a family of 4 its $184,000, just to give some perspective. As for all the other numbers the people claimed in the comments, it really doesn't matter, the CBO estimates the administrative costs for health insurance companies across the board was 12%, and for large companies it was 7%, which INCLUDES profit and advertising, so does anyone think the government could be more efficient than that? I'm sure there are those out there who would make that claim, but they'd be dead wrong. Grim, yes, 96.6% goes to keep those companies running, most of which is paid out in benefits. People keep talking about the rising costs of health care, with little consideration as to what you are getting for your money, the TRUE culprit is technology and medical breakthroughs and advancement, but I'd bet my life that the government is responsible for more of the rising costs by FAR than any health insurance company. It now costs about $1,000,000,000 to research, develop and manufacture a single drug these days because of all the government regulations pharmaceutical companies must go through to get it approved, so who is the real villain here? The GOVERNMENT!

Scott Beasley of TN 11:23PM May 12, 2011

You keep saying that insurer profit margins are 3.4% -- but 3.4% of what? If calculated against total revenue, that's misleading. Even at the time you wrote this, in 2009, state-level regulations imposed minimum medical loss ratios (MLRs) on insurers that required them to spend some minimum percentage of premium revenue on care. The minimum averaged about 75%, depending on the state and type of policy. After Jan. 1, 2011 -- thanks to the 2010 reform law -- it is supposed to average 80% to 85%. So the relevant measure of profitability is net income divided by percentage of revenue the insurer is allowed to retain as profit. What you call a 3.4% margin is really a 13% margin under the old ratios, and a 17% margin under the new federal rules. That's pretty profitable by most standards.
And even if profits really were 3.4%, there's no justification for using 3.4% of premiums to pay shareholders and C-level managers when that money could be going for actual care. For-profit insurers don't add value; all they add is cost.

Chris of NY 8:30PM May 04, 2011