Health Insurers Not Really Raking In The Profits
And, believe it or not, it’s the AP that explains it:
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.
One thing to watch for is politicians and pundits talking about insurers’ profit in absolute dollars, not as a percentage of revenues. This is highly misleading, bordering on outright dishonesty, because in order to stay in business health insurers have to have extremely large cash reserves; these are required by most states, and even if not required, the money to pay for all those procedures have to come from somewhere. Since most states also have laws that require payment of medical insurance claims within a set time frame (30 days is usual), it’s not like the company can sit around and wait for next months’ premiums to roll in.
The more we learn about the Obamacrats and their push to take over the health care of all Americans, the more questionable claims and dishonest statements we find.