Comments and observations on social and political trends and events.

Monday, October 26, 2009

The Truth About Health-Insurance Industry Profits by Robert Bidinotto

In a rare, refreshing example of real journalism in the mainstream media,Associated Press actually fact-checked Democrat claims that insurance companies are making obscene profits, while they let sick people die. According to this narrative, we need a "public option" in health-care reform to compete with these rapacious companies, to drive down their outrageously high premiums, and to "keep them honest."

But, what are the facts? A.P. checked and discovered its all a pack of lies:

Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.

Insurers are an expedient target for leaders who want a government-run plan in the marketplace. Such a public option would force private insurers to trim profits and restrain premiums to compete, the argument goes. This would "keep insurance companies honest," says President Barack Obama. . . .

But in pillorying insurers over profits, the critics are on shaky ground. A look at some claims, and the numbers:


_"I'm very pleased that (Democratic leaders) will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years." House Speaker Nancy Pelosi, D-Calif., who also welcomed the attention being drawn to insurers'"obscene profits."

_"Keeping the status quo may be what the insurance industry wants their premiums have more than doubled in the last decade and their profits have skyrocketed." Maryland Rep. Chris Van Hollen, member of the Democratic leadership.

_"Health insurance companies are willing to let the bodies pile up as long as their profits are safe." A ad.


Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better - drugs and medical products and services were both in the top 10.

The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.

HealthSpring, the best performer in the health insurance industry, posted 5.4 percent. That's a less profitable margin than was achieved by the makers of Tupperware, Clorox bleach and Molson and Coors beers.

The star among the health insurance companies did, however, nose out Jack in the Box restaurants, which only achieved a 4 percent margin.

UnitedHealth Group, reporting third quarter results last week, saw fortunes improve. It managed a 5 percent profit margin on an 8 percent growth in revenue.

In short, private health-insurers are already squeezed to marginal profitability. Knowing this, what do you suppose is the motive of Democrats -- whose leadership, from the White House down, is dominated by advocates of "single-payer" government-run health insurance -- in wanting to further squeeze private insurers? When they say they want "Medicare for all Americans," what do you suppose they wish to happen to private insurers?


This debate is not about controlling health-care costs. It is about controlling your health care -- period. Share the facts with your congressman and senators, and let them know that their political futures depend on their strangling the ObamaCare monster in its crib.

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