Insurance Discussion

The Associated Press released an analysis today, October 25, entitled “FACT CHECK: Health insurer profits not so fat,” that exposed another myth associated with the long struggle to reform the health care mess in America.  Health insurers have been vilified and pilloried by Democrats, liberals and media pundits as the villains in the health care crisis in which skyrocketing costs have risen to twice as much per capita as in other industrialized nations, while at the same time leaving tens of millions uninsured, millions more underinsured, and virtually all, other than those covered by Medicare and Medicaid, vulnerable to losing coverage altogether in the event of job loss or serious accident or illness.

But this is not the case.  Health insurance profits are relatively modest compared to other industries, as the article points out, and in terms of absolute numbers, profits of the industry are dwarfed by the total amount we spend on health care in this country, roughly $2.3 trillion.  Coincidentally, at The Huffington Post blog on October 22, I commented on another reader’s claim that health insurance company profits were the “highest on the planet:”

“That’s simply false. The health insurers have relatively low profits/revenues ratios compared to many other industries. Running around 5%, give or take a point or two. We are all missing the mark – the health insurers are more the messenger than the villains. Skyrocketing health insurance premiums mostly reflect skyrocketing health care costs. Profits among the giants in 2007, their best year, amounted to around $13 billion. That’s not much compared to the $2.3 trillion we spend on health care. We have completely lost sight of the fact that the main culprit is the health care system itself, not the insurance end of it, although they do contribute their fair share to the mess. But mostly we hate them because of their vile practices of cutting coverage via pre-existing conditions, rated premiums, rescissions and limitations on benefits. The irony is that if we end all that, costs will go even higher. This is a very complex and systemic problem, and I don’t think any of the bills will do much about spiraling costs.” (The Huffington Post, October 22, 2009)

Note the similarity of the Associated Press’s statement, “Health insurance profit margins typically run about 6 percent, give or take a point or two,” to my comment above, “[Health insurer profits] Running around 5%, give or take a point or two,” from three days before.  

It is vital to keep this in mind as potential reform moves closer to a final bill.  We must understand that the crisis is pervasive and deep, and that there is no single panacea, not even single payer, which most liberals, including myself, would like to see someday in this country.  Witness the financial strain on Medicare.  The health insurers represent only one aspect of the problem.

This entry was posted on Sunday, October 25th, 2009 at 3:52 pm and is filed under Health Insurance, News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.