>When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs
Do you have any source for this?
I’m assuming (because HN) that you had the USA in mind, and it doesn’t pass the sniff test for me given that US insurance fees are more than single digit percentages higher than other high quality care countries with privatised healthcare systems
Insurance fees are not high because the insurance companies are making huge profits.
They're high because providers are making huge profits.
Now granted, they may ultimately be the same thing, but that's a different discussion [1]
In the context of housing (fires, hurricanes etc) insurance is expensive because housing is expensive to build.
[1] insurance companies have to invest their income somewhere. It makes sense to choose companies will high returns. Which includes some health care providers. Which can basically change whatever they like because of structural reasons that have been well discussed.
> Insurance fees are not high because the insurance companies are making huge profits.
United Healthcare alone made $23,000,000,000 in profit in 2023. Health insurance companies have collectively made $371 billion in profits since the passage of the Affordable Care Act.
Property & Liability insurance (home, car, etc) have relatively modest profit margins, but health insurance companies absolutely are making huge profits.
Using absolute numbers here doesn't really make sense. 23B sounds big but its impossible to say if its a high or low profit margin without context.
It’s profit and it’s very large.
> alone made $23,000,000,000 in profit in 2023
why is this number considered huge? What measure are you using? These absolute numbers are meaningless, because you have to put it into context. That's why profit margin is what analysts use, not the absolute number.
If i changed those figures to: they made $77 per person, per year in the USA for providing healthcare services, does that still seem as big? Or is it now reasonable?
$23,000,000,000 profit/29 million insured makes $793 profit per insured person.
That's huge isn't it? $800 bucks in profit per customer? What does Apple make? Or Unilever?
Why compare to Apple, when the healthcare is arguably more complex and expensive?
the original OP is claiming that the healthcare industry is too profitable. So you have to compare it to something to see if it is too profitable.
Right, but why use Apple ($800 phone every 2-4 years) compared to say, an automaker ($40k in depreciation over 10 years) or a REIT ($2000 in rent every month)? Moreover, why focus on absolute profits? If the healthcare industry split into 3 (eg. doctors, dental, drugs) but with the same margins, does that mean they're suddenly not "too profitable"?
No, UnitedHealth Group made $22B in profit in 2023. Only about half of that profit came from the UnitedHealthcare insurance business. The other half came from the Optum side which is a mix of non-insurance stuff. Optum makes huge profits on software: if the software business was spun out it would be one of the top 20 US tech companies.
https://www.unitedhealthgroup.com/investors/financial-report...
The issue in the US is that there is no price regulation for different procedures (other than Medicare), plus the providers (hospital chains) are intertwined* with insurance. The end result is everyone charges as much as they can and the premiums need to be high, even if insurance technically negotiates the rates down from the “sticker” price. Insurance companies are willing to take a small percent of profit because there is so much money being taken from customers.
* https://www.statnews.com/2024/11/25/unitedhealth-higher-paym...
Right, low profit margins are not a valid argument for why it’s invalid for consumers to suspect there is some inefficiency compared to other markets. Saying the system must be efficient because profits are low is like saying boiling water should be as cheap as 98->99 degrees C because it’s just +1 C - profit margins aren’t as good an indicator of whether there is an unusual amount of disorder in the system, compared to extremely context-sensitive resource costs for hypothetically identical systems.
I think the point is more that the insurers are not the real target for your wrath. You should not motivate your congress person to do something about the insurance necessarily. It's probably better to look at a level further up the chain for example.
Part of the problem is that the existence of the middle man adds a lot of costs: insurance company salaries, their executives, doctor's office billing coding, advertising, etc.
The shareholders take home only a fraction. But a lot of money gets spent that simply doesn't need to be. Other countries avoid the deadweight loss of the middle man.
>Part of the problem is that the existence of the middle man adds a lot of costs: insurance company salaries, their executives, doctor's office billing coding, advertising, etc.
that's not a sophisticated analysis. it would be like saying mcdonalds is unecessarily expensive because executive pay, and cars, and dry cleaning, etc. etc. yet, if you tried to found a competitor, you'd have all those same expenses. even charities have to pay management.
insurance companies make money because their aggregate risk is less than your individual risk, and you really don't want your individual risk so you are willing to pay them extra, a premium, to get them to shore up your downside. After that it's like any other company selling any other thing.
The genius of the US way is that the politicians avoid the heat when healthcare coverage is denied. Whereas UK and Canadian politicians have to answer to their constituents.
Of course, now that getting murdered is on the table, the US health insurance executives might want to up their compensation.
> Whereas UK and Canadian politicians have to answer to their constituents.
Yeah, and "politicians have to answer to their constituents" is how we got the failed insurance markets in California and Florida. This thread has now gone full circle.
That is the problem with conflating insurance and subsidy.
To buy votes, politicians sell “insurance”, but in reality it is a subsidy to a specific group of taxpayers.
When a government directly pays for healthcare, it can’t be called insurance, and so limits to the subsidy are easily attributed to the government leaders.
Whereas, if a government has the population buy “insurance” from non governmental entities, then it can pretend (for the layperson) that it isn’t a government subsidy and so the laypeople can blame limits of the subsidy on someone else.
Obviously, health insurance in the US is far from health insurance and premiums are closer to taxes being paid rather than premiums for one’s own health risks.
That isn’t so true in property and casualty insurance, at least not until governments like California step in.
no offence but that murder had nothing to do with what is right or caring for the people just a game same reason trains got graffiti on them. At most a beautiful lesson in the power that comes with controlling the narrative
That’s because healthcare is unusually expensive in the US, not because insurers’ profit margins are unusually high.
These are all the publicly listed health insurers in the US, with public financials, so the numbers come from the 10-Q and 10-K reports filed with the SEC.
Note that the first one, United Health, has slightly higher profit margins than the rest because UNH has an enormous business selling healthcare itself, not just insurance (they own a lot of doctor groups and outpatient clinics and employ a lot of doctors and nurses).
https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...
https://www.macrotrends.net/stocks/charts/ELV/elevance-healt...
https://www.macrotrends.net/stocks/charts/CI/cigna-group/pro...
https://www.macrotrends.net/stocks/charts/CVS/cvs-health/pro...
https://www.macrotrends.net/stocks/charts/HUM/humana/profit-...
https://www.macrotrends.net/stocks/charts/CNC/centene/profit...
https://www.macrotrends.net/stocks/charts/MOH/molina-healthc...
The other big insurers will be Kaiser Foundation Health Plan and various plans franchised with Blue Cross Blue Shield, but they are all non profit.
https://projects.propublica.org/nonprofits/organizations/941...
Some Blue Cross Blue Shield Association members are for-profit corporations now.
As for UnitedHealth Group, much of their profit comes from a large software business which is separate from their insurance, care delivery, and PBM businesses. If that software business was spun out it would be one of the 20 largest US tech companies.
> Some Blue Cross Blue Shield Association members are for-profit corporations now.
In this list, I couldn’t find a single for profit BCBS licensee other than Elevance. They all seem to be mutuals/member owned/non profit.
https://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Associa...
> As for UnitedHealth Group, much of their profit comes from a large software business which is separate from their insurance, care delivery, and PBM businesses. If that software business was spun out it would be one of the 20 largest US tech companies.
Interesting, I didn’t know UNH sold software!
In this list, I couldn’t find a single for profit BCBS licensee
other than Elevance.
At a quick glance Highmark and Wellmark are for-profit. And I believe the South Carolina licensee is as well. Mind you a few of the "non-profit" BCBS licensees have been sued over claims that they ought not be considered not-for-profit.
Highmark is non profit:
https://projects.propublica.org/nonprofits/organizations/821...
Wellmark is a mutual insurance company (profits go back to policyholders, seems not comparable to a for profit insurance business, and for this discussion, is not going to have a profit margin that results in higher costs to policyholders):
https://en.wikipedia.org/wiki/Wellmark_Blue_Cross_Blue_Shiel...
https://en.wikipedia.org/wiki/Mutual_insurance
>Mind you a few of the "non-profit" BCBS licensees have been sued over claims that they ought not be considered not-for-profit.
I see no successful lawsuits, though. Still seems like Elevance is the only for profit BCBS licensee.
>In 2014, BC/BS of Illinois (Health Care Service Corporation) was sued over its nonprofit status. The lawsuit was dismissed, with prejudice, and the dismissal ruling was upheld on appeal.[62] Similar suits occurred with similar results in other states such as Oregon.[63]
To be clear if Elevance is the only remaining for-profit BCBS licensee it's because they bought the others.
Highmark got labeled as for-profit on its Wikipedia entry likely because they own a variety of for-profit companies including e.g. Highmark BCBSD Inc. and Celtic Hospice LLC.
https://projects.propublica.org/nonprofits/organizations/453...
But Highmark, the parent organization, is still a non profit. Based on their revenue and expenses on their 990 going back a decade, the entire organization is not delivering profit to any owners, it’s just spending money earned in its for profit subsidiaries elsewhere in its org.
Specifics aside, I think it is conclusively shown that no health insurance / managed care organization earns a ton of profit margin. No one is going to become billionaire rich by starting up a managed care organization, because they will spend almost all they earn.
It’s such a low profit margin business, that Buffett, Dimon, and Bezos abandoned it:
https://www.healthcarefinancenews.com/news/haven-disbands-en...
But Highmark, the parent organization, is still a non profit.
> They're delivering profit
To who? Are there shareholders profiting? Employees on the take?
> Unlike the non-profit Mozilla Foundation, and the Mozilla open source project, founded by the now defunct Netscape Communications Corporation, the Mozilla Corporation is a taxable entity. The Mozilla Corporation reinvests all of its profits back into the Mozilla projects.
https://en.wikipedia.org/wiki/Mozilla_Corporation
It’s the same with Highmark, assuming there isn’t massive fraud happening.
You can literally read the 10-K statement from any of several publicly traded medical insurance companies. Average industry profit margin is about 3%. There are also some non-profit insurers but their fees generally aren't any lower.