What to do about massive health insurance profits?

Great Debates
1

The health insurance industry makes a massive 3.3-3.4% profit margin. No industry should make this much. What should we do about this outrage beyond a government option? What is the best we can hope the government option will get this profit margin down to? Maybe 3.1%?

What should we do about 85 other industries that make a higher profit margin? Microsoft makes a 24.9% profit margin. Do we need government option computer software? Should all of the 85 industries with higher profit margins compete with a government option. Or is this profit only wrong for the health insurance industry?

How do did ever let the health insurance industry get such a high profit margin? This profit level is just wrong. Let’s teach the health insurance investors a leason in morality.

http://biz.yahoo.com/p/522qpmd.html

2

Are you serious? I literally mean that. Or is this a joke? You realize that your first link directly contradicts your main point, right?

3

First you have to convince us of this.

ETA: You should email an admin and ask to have the ; added to the end of your name. Your current username is breaking the quote function.

4

Healthcare Facilities: 28%
Healthcare Information Services: 9%
Home Health Care: 8.9%
Drug Delivery: 8.9%
Medical Instruments and Supplies: 8.7%
Processed and Packaged Goods: 8.4%
Medical Laboratories and Research: 8.4%
Food: 7.7%
Accident and Health Insurance: 3.9%
Health Care Plans: 3.3%
Hospitals: 3.1%
Medical Equipment Wholesale: 3%
Drug Related Products: 2.8%
Food Wholesale: 2%

Walmart, that bastion of cheap goods, has a 3.4% profit margin. But probably 80% of goods that you buy from day to day is going to be around 8% profit. Health Insurance is half of that and getting down towards wholesale prices.

5

The average big execs makes 14 mill a year. they pay tons to their exec staff. The double price every 8 years. yet they make 4 percent. Quit reading heath care web sites. They are like gas companies claiming a penny a gallon. it is absurd. They are using creative accounting to show profits as something else. If they were actually making 4 percent they would have to be terribly run and the board should be fired.

6

So your argument is that no one is noticing 33% of all health care spending (AKA $700,000,000,000) disappearing into embezzlement?

Let’s say that 1% of everyone in the US worked in health insurance, that is to say, there are 3.5 million employees of health insurance agencies. This would make the average salary in the health insurance industry $200,000. I think not.

7

You do realize that salaries and bonuses are expenses not included as part of a company’s profits, right?

8

That would be the point wouldn’t it. They absorb tons of money in raising salaries ,give bonuses and massive retirements to the execs and bingo profits don’t go up.

9

How much do you think executive compensation adds to the cost of premiums? I assume the number is miniscule. As far as employee salaries, how would this differ from a government plan. Hell, government employees are ensured a pay raise every year, get a 5% match to their TSP, and have a huge portion of their health insurance subsidized by the government.

Plus, you DO realize that profit is calculated after all payouts. There is no guarantee that insurance companies will profit at all. If they are hit particularly hard by an increase in claims then their profits go down. They MUST set aside some sum of money for this potential risk. If they don’t have to pay out as much then they profit. The insurance industry can be risky. Risk increases prices. This is just the cost of doing business.

10

I assume it is not miniscule. The exec packages are huge and reward execs for being lucky enough to fall into a powerful job. But there are lots of execs gathering huge rewards while the insurance companies premiums skyrocket and coverage shrinks. It is not just the top exec who is looting. It is hundreds of overpaid bosses cleaning up.

11

Okay, you said before that they’re taking 18 million a year average. Let’s assume that they’re secretly taking three times that amount via embezzlement and creative accounting, and not only that but their board of directors and top executives–say 20 people in all–are all taking an even amount. Now let’s say that there are 100 health insurance companies in the US. So this equates to:

$18,000,000 * 3 * 20 * 100 = $108,000,000,000

So now 3.8% (the alleged profit of health insurance companies) of all money spent on health care is:

$6000 * 350,000,000 (pop of the US) * .038 = $79,800,000,000

Slightly less. But let’s say that in truth they’re taking 8%, the average for most things you see in a store, rather than the 3.8% that they are lying about:

$6000 * 350,000,000 * .08 = $168,000,000,000

Ahah, this handily covers all the embezzlement you could ever dream of. And yet, in order to explain the price disparity between the US and other nations, they would need to be embezzling $1,050,000,000,000, or that is to say roughly 10 times our insane level of embezzlement.

Now, let’s also consider what sort of effort it takes to convince 100 separate companies to all unanimously embezzle money, and for all 100 of them to perpetrate this starting from at least 1976, when we diverged from the rest of the world, and yet no one has yet blown the whistle on this massive multi-corporation conspiracy.

Hmm… I’m considering it now.

Hmmm…

Nope. I think not.

12

What percentage of premiums do you think are due to executive compensation? I can’t find any hard data on this but I have a good feeling it is next to nothing. Do you really believe shareholders would allow their company to increase premiums by a large amount just to pay executive bonuses? With all the heat on them now concerning healthcare costs? Have you ever stopped to think that all the expensive advances in medicine may account for the increased premiums?

13

It’s not about profit. Profit is a very minor component of the cost of health insurance. Let them have their profit - good for them. It’s also not just executive compensation that raises the cost of health care in the US, although it is a component. - it’s also massive inefficiencies in the system. (imagine if we had “competing” electric companies, each of whom had to maintain separate power systems and lines to every house) It’s a doctor’s practice having to hire people just to get paid by myriad plans. It’s the vast numbers of people hired by the insurance companies (not just executives), who are well paid to push paper around. It’s having “competing” hospitals and health plans spending money on advertising their services.

Add all of these components together: Profit, High exec salaries, lots of employees pushing paper, extra costs to doctors to deal with companies, inefficiencies with multiple competing plans

It adds up to higher costs for medical care… For EVERYONE in the country.

14
15

“Sell across state lines” again. Hasn’t this been knocked down before in another thread? Are you in favor of clearing out all state-legislated insurance regulations then? Because that’s what it would require.

16

The fact that this is an idea that the Wall Street Journal likes is a fairly good indication that it’s good for the Insurance Industry and not really good for anyone else.

17

Expect a bit of premium and coverage nastiness in the next little while. Health insurance companies take the premiums and invest them. Without the earnings from the investments, they have to raise rates and cut coverage.

As most of you realize, a lot of investments tanked when the recession hit. Health insurance companies investements tanked along with everyone else’s. You can expect some massive write downs in the next year, and because of these write downs, you can expect your rates to go up and your coverage to decline.

What are the figures? I haven’t a clue, but to put it in perspective, a VP at one of Canada’s largest life and health insurance companies told me that they are considering writing down between three and six billion dollars once they get a better handle on what their investment losses actually are.

I have no sympathy for American health insurance companies, and I think the resistance to universal coverage is both morally and financially unacceptable, but given what has happened with investments recently, I am the first to recognize that health insurance companies have their asses in a crack.

18

It’s the same recommendation as Liberals are making: Move to fewer sources of money. Having a hundred different companies managing health insurance just bloats administration costs and makes everything confusing. If you make it so that there are a smaller number of companies, an official way for a person to transfer their policy from one carrier to another, and the carriers aren’t allowed to refuse insurance to anyone, you’ve got UHC without turning the entire world upside down.

Sure it might mess with local state regulations, but telling them that they have five years to get rid of those laws is a lot friendlier than shutting down an entire industry and laying off millions of people.

19

So add to my list of why US health care is expensive: Losses to Insurance companies who speculated with investments in a bubble market.

The 3.3% profit margin is a red herring. The profit is just one component of extra costs.

20

Speak of the devil – I just received notice of a 20% increase in my professional E & O insurance premium, of which a very large chunk was explained as being necessary to replace unearned investment income. Since the insurer was created to service my profession (as opposed to make profits for others), I believe their explanation.