AP: FACT CHECK: Health insurer profits not so fat

[Soul Crusher]

FACT CHECK: Health insurer profits not so fat
 
 
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Oct 25, 8:37 AM (ET)

By CALVIN WOODWARD

WASHINGTON (AP) - Quick quiz: What do these enterprises have in common? Farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer: They're all more profitable than the health insurance industry. In the health care debate, Democrats and their allies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while "the bodies pile up."

Ledgers tell a different reality. 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.

The debate is loaded with intimations that insurers are less than straight, when they are not flatly accused of malfeasance.

They may not have helped their case by commissioning a report that looked primarily at the elements of health care legislation that might drive consumer costs up while ignoring elements aimed at bringing costs down. Few in the debate seem interested in a true balance sheet.

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

THE CLAIMS

_"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 MoveOn.org ad.

THE NUMBERS:

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.

Van Hollen is right that premiums have more than doubled in a decade, according to a Kaiser Family Foundation study that found a 131 percent increase.

But were the Bush years golden ones for health insurers?

Not judging by profit margins, profit growth or returns to shareholders. The industry's overall profits grew only 8.8 percent from 2003 to 2008, and its margins year to year, from 2005 forward, never cracked 8 percent.

The latest annual profit margins of a selection of products, services and industries: Tupperware Brands, 7.5 percent; Yahoo, 5.9 percent; Hershey, 6.1 percent; Clorox, 8.7 percent; Molson Coors Brewing, 8.1 percent; construction and farm machinery, 5 percent; Yum Brands (think KFC, Pizza Hut, Taco Bell), 8.5 percent.

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Associated Press writer Tom Murphy in Indianapolis contributed to this report.

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[SAMSON123]

I can tell you from working in the health insurance industry that the profits are OBSCENE and the corruption is beyond VILE. This ass that wrote this article is obviously and insider or someone hired/paid to write an article making the health insurance industry seem genteel in nature when it in most cases is savage towards ones health.

[2ND COMING]

percentages?

show us the numbers, 33.

im guessing if walmarts profits rose by 2% for 1 year, that 2% would blow away a 10% profit for subway.

gimme a break

[Soul Crusher]

percentages?

show us the numbers, 33.

im guessing if walmarts profits rose by 2% for 1 year, that 2% would blow away a 10% profit for subway.

gimme a break

I posted and article from the associated press.  I dont know what the author used for his figures.  But thewre is a similar article on businessinsider.com

[240 is Back]

only 6% profits, huh?

Yeah, I can see how a doc seeing you for a small injury and handing you a bill for $2,000 is just a quick 150$ markup...

[Soul Crusher]

only 6% profits, huh?

Yeah, I can see how a doc seeing you for a small injury and handing you a bill for $2,000 is just a quick 150$ markup...

How did you get an MBA?

The doc has massive overhead to deal with.  ask Shoot or DrKaje what their overhead is like. 

[240 is Back]

How did you get an MBA?

The doc has massive overhead to deal with.  ask Shoot or DrKaje what their overhead is like. 

Yes.  That's why they all drive hyundais.

[Hugo Chavez]

profiting off of death and life, disgusting.....

[Skip8282]

How did you get an MBA?

The doc has massive overhead to deal with.  ask Shoot or DrKaje what their overhead is like.  

I'm not sure how the docs come up with their prices, but I've never seen the insurance companies pay the face value of the bill.  Usually the statement is say for $1000.00, then the insurance company will say something like:  Plan reimbursement for this service is $500.00 minus your 20% co-pay, and then pay that amount.

Maybe the docs use it as a tax write-off at the end of the year claiming a loss or something?

[2ND COMING]

profiting off of death and life, disgusting.....

[hh6] waaa waaa,, douchebag [/hh6]

eh i tried.

[Hugo Chavez]

[hh6] waaa waaa,, douchebag [/hh6]

eh i tried.

lol...  I'll give HH6 credit.  If you ask him or task him on anything, he puts the time in to give an opinion.  I don't agree with him often but I think he brings a lot to the board post wise.  His posts have degrated some lately with Obama in office, there are some incoherent Obama rants from him but overall I gotta respect HH6.  You can at least reason with him on some items which is more than I can say for Tony and 3333 who are "always right" lol...

[2ND COMING]

profiting off of death and life, disgusting.....

[hh6] you dont matter douchebag. enjoy breathing my air [/hh6]

 

[2ND COMING]

lol...  I'll give HH6 credit.  If you ask him or task him on anything, he puts the time in to give an opinion.  I don't agree with him often but I think he brings a lot to the board post wise.  His posts have degrated some lately with Obama in office, there are some incoherent Obama rants from him but overall I gotta respect HH6.  You can at least reason with him on some items which is more than I can say for Tony and 3333 who are "always right" lol...

i concur

[Soul Crusher]

i concur

Being right is far preferrable to being wrong.     

[Hedgehog]

Allstate Insurance and The Hartford Group are two of the biggest ones.
And both are owned in part by Goldman Sachs.

So I don't understand those of you who want Obama to go easy on the insurance companies.

And still argue that he gives the banks a free pass.

Because if Obama - or rather the legislators - backs of the health insurance companies, then that's the equivalent of feeding Wall street bankers.

Again.

Why not instead demand that Obama actually backs up on his promise of "change".

That he'll deliver some type of stop to the age old lobbyist run Washington?

That the legislators who are actually elected - and not the corporations - set the rules.

[Soul Crusher]

Allstate Insurance and The Hartford Group are two of the biggest ones.
And both are owned in part by Goldman Sachs.

So I don't understand those of you who want Obama to go easy on the insurance companies.

And still argue that he gives the banks a free pass.

Because if Obama - or rather the legislators - backs of the health insurance companies, then that's the equivalent of feeding Wall street bankers.

Again.

Why not instead demand that Obama actually backs up on his promise of "change".

That he'll deliver some type of stop to the age old lobbyist run Washington?

That the legislators who are actually elected - and not the corporations - set the rules.

The issue is that the government sets the rules and puts up many barriers to new players entering the market. 

In many areas there are only one or two insurers for people to pick from.  The barriers to starting up a company are so high, and the pressure to not allow new companaies so great from the existing players, its impossible to have any real competition. 

Competition always brings down the price.  What we are getting is less competition and great govt control, which only drives up the costs. 

Hedge - did you watch "The Warning" on pbs.org? 

If not, go check that out if you want to know WTF is going on.  The govt is just as evil and bad as the private companies.  They are one and the same.  there is no difference.

This is where some posters here and I have a huge fights.  They think that the govt is some benign entity that is being vcictimized by these private corps and that if only the govt could get control of these items everything would be ok.  Its complete rubbish.  The govt is the problem since they set the rules that got us here in the first place.

Why would anyone trust the govt to do anything when the govt is the entity that caused the problem in the first place?             

[SAMSON123]

I'm not sure how the docs come up with their prices, but I've never seen the insurance companies pay the face value of the bill.  Usually the statement is say for $1000.00, then the insurance company will say something like:  Plan reimbursement for this service is $500.00 minus your 20% co-pay, and then pay that amount.

Maybe the docs use it as a tax write-off at the end of the year claiming a loss or something?

Here is a little inside info...on average the insurance company pays about 10 to 15 percent of the face bill. An example would be I had to get an MRI... without insurance $2200.00 for the very basic MRI this did not include the reading (evaluation by MRI doctor who interprets the scan, types up the results and includes them with the MRI which goes to your PCP or specialist). When the bill was sent to my carrier (which i work at, so I was able to do a few computer key strokes and see it) lo and behold the insurance company paid out ony 300 dollars of the 2200 dollar bill. I had to stay in th hospital a couple of nights at a cost of 3500.00 dollars per night (yes...you read that number right). My insurance company paid 350.00 dollars per night and in both cases no cost was passed onto me.

So all of the BULLSHIT about expenses, not making profits, overhead is all LIES... These insurance companies are making out like WALL STREET thieves.

[Skip8282]

Here is a little inside info...on average the insurance company pays about 10 to 15 percent of the face bill. An example would be I had to get an MRI... without insurance $2200.00 for the very basic MRI this did not include the reading (evaluation by MRI doctor who interprets the scan, types up the results and includes them with the MRI which goes to your PCP or specialist). When the bill was sent to my carrier (which i work at, so I was able to do a few computer key strokes and see it) lo and behold the insurance company paid out ony 300 dollars of the 2200 dollar bill. I had to stay in th hospital a couple of nights at a cost of 3500.00 dollars per night (yes...you read that number right). My insurance company paid 350.00 dollars per night and in both cases no cost was passed onto me.

So all of the BULLSHIT about expenses, not making profits, overhead is all LIES... These insurance companies are making out like WALL STREET thieves.

Interesting.  I think we still need insurance companies.  They employee a huge amount of people and I don't think our economy could do without them.  But, massive reform is needed.

[Hugo Chavez]

Being right is far preferrable to being wrong.     

funny thing about people that are "always right"  They're often wrong.

[shootfighter1]

Sampson, you're talking about hospital billing.  Remember guys, doctor's are usually part of a system.  They don't set the bills, they are paid a salary and the rates are set by the practice administrators and hospitals.  Hospitals are now tacking on facility bills too because they are loosing $.  The overall cost of healthcare is just too high.

Here's how rates are set at private offices....

Every service has a medicare allowable (which by law is set to be the lowest reimbursement rate).  You look up the list.  Then most practices add 20-35% on top of the medicare allowable in their bills to insurance companies.  No matter what the practice bills, the insurance companies set their reimbursement rates as a % of the medicare allowable...so, 110%, 120%, etc.

The problem is all costs associated with a practice have gone up (malpractice, licencing fees, continuing education, staff, healthcare, utilities, rent, medical and office supplies, etc) but the reimbursement rates are stable or decreasing.  This is why many private docs give up on private practice and fold into a hospital, where they dictate what you do and force you to see more patients per hour.

[shootfighter1]

I forgot one huge expense that has increased....TAXES.  If you are a small medical practice, it's already a struggle, then the tax you at 35-40%.  It's f'n insane.  So hard to stay open.  With respect to primary care, most of the time, patients get the best care with physician ran practices because the doctors control the care, not the nursing and business administrators.

[shootfighter1]

FYI, there is more waste and fraud in medicare than in private insurance.  Something to keep in mind when you are forming an opinion on gov ran healthcare.  We all hate when insurance companies take advantage of people but they are less wasteful than the huge gov.  Gov should be setting laws and standards to protect us from unfair insurance practices, not directly delivering care.  They can make that happen with mandates, laws and forcing pure competition...but the liberals want gov control, just like in other areas.  It's a power grab guys.

[shootfighter1]

I wrote these responces yesterday...just wanted to bump so skip can see them.

It's important to get the inside scoop so you guys understand how billing and reimbursement in medicine.
I still don't understand how hospitals set their rates so high compared to private offices, I imagine the overhead is so massive.  Still, Samson is right about insurance companies only paying a % of hospital bills, a small %, like 20-40% from what I've seen.

[Hedgehog]

FYI, there is more waste and fraud in medicare than in private insurance.  Something to keep in mind when you are forming an opinion on gov ran healthcare.  We all hate when insurance companies take advantage of people but they are less wasteful than the huge gov.  Gov should be setting laws and standards to protect us from unfair insurance practices, not directly delivering care.  They can make that happen with mandates, laws and forcing pure competition...but the liberals want gov control, just like in other areas.  It's a power grab guys.

Isn't regulation the same as control?

Not saying you're wrong in your general concept.

But in one instance you want the government to keep regulations firm and protect customers.

At the same time you seem to oppose the Democrats trying to raise the amount of control of the insurance industry.


Are your issue with the Democrats that they're going about doing it the wrong way?

If you would, please explain.
Very valuable to get the opinions from someone who's very much involved in this on a day to day basis.

[Soul Crusher]

Isn't regulation the same as control?

Not saying you're wrong in your general concept.

But in one instance you want the government to keep regulations firm and protect customers.

At the same time you seem to oppose the Democrats trying to raise the amount of control of the insurance industry.


Are your issue with the Democrats that they're going about doing it the wrong way?

If you would, please explain.
Very valuable to get the opinions from someone who's very much involved in this on a day to day basis.

The entire notion of medical insurance to cover everything is stupid to begin with.  People should be able to buy a catastrophe plan for cheap, and get a huge write off for any out of pocket expenses for normal stuff.

The employers can pay the people more and not have to deal with insurance, and the people free to do whatever they want.  Doctors can have more say on direct pricing and not have to deal with the carriers for every little thing.

Think of it like this, what if your auto insurance policy had to cover scratches and dents and flat tires.  How much more would it be?