WASHINGTON – 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.
http://news.yahoo.com/s/ap/20091025/ap_on_go_co/us_fact_check_health_ins...
Lepel
"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."
1Funny how the most profitable one is United Heath.. the ones that run AARP... the ones that sponsored obamas bill... when no one could figure out quite why, it was revealed that Obama wants to cancel medicare advantage plans and only allow medicare supplement plans at the request of AARP in order for them to sponsor his legislation... see aarp does not have medicare advantage plans, merely supplements. That just struck me after re reading this article
But I thought this was good in showing how some people in power like to put their feet in their mouths
M'eh. Insurance company profits slid with the economy - where's the surprise? They've done very well in the past ten years: they're paying their CEOs very generously, and spending tens of millions to lobby against reforms that would help struggling Americans.
2sources and stats please to back up your claim, insurance should be the one thing that doesnt slide, most people who get it from their employers cannot opt out at anytime, so you would have to prove this is merely because of the economy.
3Maybe we should take over clorox next, because we will need bleach to kill the swine flu, those darn greedy clorox execs, charging exorbitant prices and depriving people of the necessities to kill such a dangerous virus!
The need for reform is not driven by insurance company profits, it's driven by the way insurance companies have failed consumers.
Clorox isn't exorbitantly priced, and you can kill germs with other products.
4You say that but if you read the article posted it has plent of quotes that show prominant democrats have used profits as the reason for reform. You call for accountibility regarding comments on heath insurance reform by republicans, shouldn't you require the same from democrats. They have thrown out those comments blatantly lying to get people angry so they fall in line with the democrat view. I see this NO different than "death panels." Using fear and anger to geyt people on your side by distorting or lying about the facts
5Distorting facts? Let's go to a source you'd likely approve and see how they explain the 2000-2008 profit story:
http://www.cnsnews.com/news/article/52745
"In calling for health care reform, many Democratic congressmen say that private health insurance companies enjoyed 400 percent profit increases over the last eight years – a statistic generated by the liberal coalition group, Health Care for America Now (HCAN). But industry analysts say those numbers are selective and “meaningless” in terms of understanding profits.
“They are cherry-picking even their own meaningless data, because their chart shows profits dropped by 35 percent from 2007 to 2008, making the increase from 2000-2008 only 249 percent instead of 428 percent,” Dr. Robert Book, senior fellow for Health Economics at the conservative Heritage Foundation, told CNSNews.com." ...
...Book also compared the statistics from AHIP and HCAN.
“They are really both looking at profit margins,” said Book. “AHIP is expressing them as a percentage -- I'm guessing as a percentage of total revenue, which would be reasonable.
HCAN is taking the same numbers, selecting a few companies, adding up their profit (in dollars, not percent-of-revenue) and looking and how the dollars change between selected years.”
“In short, HCAN is starting with the same profit margin numbers, but is expressing them in a meaningless way,” said Book.
Ely also said the method HCAN used to gather its data is flawed and suggested a better way to measure profits.
“A far better measure of health-insurance profits that the public option supposedly would eliminate are after-tax profits as a percent of premiums paid to the insurance companies, such as the 3.5 percent figure cited by the American Hospital Association,” said Ely. “I cannot vouch for that number, but it does not seem too unreasonable.”
For example, the health insurance company Aetna states that its “after-tax profits as a percent of its revenues for the first half of 2009 were 4.5 percent, down from 5.9 percent for the first half of 2008,” said Ely. “To put these numbers in another light, 95.5 percent (100 percent - 4.5 percent) of Aetna's revenues in the first of 2009 were consumed in payments of their insured's medical bills, by the expense of running an insurance operation, and by the income taxes Aetna pays.”
He continued: “If those payments, expenses, and taxes had been just 4.7 percent higher (4.5 percent/95.5 percent), then Aetna would not have made any profit,"
6So an industry expert says the HCAN report, which it seems most of the insurance critics are using to call for reform, is flawed. It appears your article supports Hainan's position.
7An insurance industry expert from the Heritage Foundation in an article from CNS says if you change just about everything about the study, including the years studied, you might get results that won't show the obscene profits the HCAN study found.
Distorting facts to counter HCAN's results.
This was my favorite line: "making the increase from 2000-2008 only 249 percent instead of 428 percent" ,
8But if insurance companies were really making profits like these, why don't we see new insurance companies springing up all over the place trying to get in on the money?
9So you are OK with politicians skewing facts to get people angry to support a party line???
10This article shows very little business acumen, there are better measures of 'profits' that could have been examined. Looking at one metric (OPAT I'm assuming) is short sighted.
11Here is another look at insurance profits. These numbers don't seem small to me.
http://wonkroom.thinkprogress.org/2009/08/05/are-health-insurers-making-...
12"since insurers are measuring their profits against total health care spending, not company revenues. “ I don't understand why this is a problem... to me this just sounds like they are leaving out their overhead which would make their profits even less.
13"suggests that within the last 10 years, insurers have been spending less on medical care and more on administrative costs or profits:" you jump to assme that it is 100% profits... The additional regulations that have been put on insurance companies have forced them to hire more administrative staff to dot I's and cross T's
14Wow, its not even OPAT its something they made up entirely. They should word it 'profit' and not profit.
15"profits were anywhere from 2 to 10 percent, or two to 10 pennies on the dollar. That’s two to 10 times as much as what the insurance industry group suggests in its illustrations.” My article clearly states that they are well within that band. I don't consider 2-4% as obscene or immoral
16Railroads made 12% profit, the industry that Obama sent stimulus money to!!!! Where is the outrage over that? Those people are raking in Obscene Profits while making out food prices soar, geez
17Here is the big flaw in the article: don't use financial metrics if they aren't real, and not compare these fake metrics to supposed profits of other companies like Hershey's.
18Secondly, you can't just look at profits by themselves. They are manipulated so the company maintains shareholder expectations (at a minimum). You would need to look at the entire income statement to fully understand a companies financial success.
19Agreed Mydia.
20well the comments by some of our congressional leadership say they are making immoral profits, so you are OK with them saying that to promote fear and anger?
21I don't think they're saying it to promote fear, maybe justifiable anger. Companies that can pay one executive 3 to 24-million dollars a year, and spend millions on lobbyists and b.s. studies to block reforms that will help people, probably are immoral.
Claiming the reforms will allow the government to kill grandma is a flat out lie designed only to frighten - and many of the major promoters of that canard had endorsed those same policies elsewhere.
22will these reforms help people, sure some. But will also hurt others. i think there is a better way to go about reform then what is being offered by democrats. Hurting others because they don't agree with you view is no better that a BUSINESS trying to salvage any kind of profit and prevent the government from running them out of business all together. So i guess it is all in how you look at it. And Obama spent a million keeping his birth certificate out of the courts, so spending millions doesn't always mean you have something to hide, right?
23I think its the same and sinceit is your side promoting fear/anger you are ok with it
24"They're gonna kill your grandma" and "They've got money to try & sell you the Brooklyn Bridge" are different.
25It's hard to take people who bring up the birth certificate seriously.
I was just saying that someone who spends millions to block stuff is not always the bad guy
26But nice bias
27And fear is fear, _"Health insurance companies are willing to let the bodies pile up as long as their profits are safe." A MoveOn.org ad.
28Is ABSOLUTELY no different they are going to let your grandma die over profitability now IS IT???
I think that is your opinion. A company should be allowed to spend their money as they see fit, just as an individual would. (And yes, that would be my opinion.
)
IMO, lying is lying, period. To say that companies are getting outrageously high profits is a lie and should not be acceptable.
29People do die without insurance.
30People don't die from having a conversation on end of life planning.
The two are very different.
I see I was slow with my comment. I was originally responding to #22 if my response above seems out of place.
31And people with insurance die. It is an unfortunate fact of life that we all die no matter what.
32No one's proved that the high profits claim is a lie, all anyone's done is try to spin it.
33" think that is your opinion. A company should be allowed to spend their money as they see fit, just as an individual would."
At what price? Insurance companies are raking in money from premiums and denying services. Premiums are raised significantly every year with no increase in service.
34New mri technology, new mammograms better more expensive care. the cost of healthcare period has risen, you expect insurers to not raise premiums when their costs rise?
35Thats just plain dumb
36People without insurance also get really great healthcare. To say oh people die because they dont have insurance is like saying well... I didnt have money to buy formula for my baby so I just let her starve versus getting a credit card that was easy and painless to get and i could have prevented her death.
37- raking in money from premiums - spouting off the democratic talking points.
38I think the dems are merely spinning their numbers to get what they want at whatever cost.
~The problem with socialism is that eventually you run out of other peoples money to spend.
39
If people without insurance get really great health care, why is anyone stupid
enough to pay for it?
40The currents plans available wouldnt even get coverage for all americans, so by your own words people would still be dying. Spending as much as we might to not even get everyone covered sounds wholly unreasonable to me
~~The problem with socialism is that eventually you run out of other peoples money to spend.
41Who said they didnt have to pay for it. You are smart enough to know that health INSURANCE and health CARE are two totally different things. Which is where the democrat fear comes into play. They blur the lines and make you think that there is no way to get any kind of health CARE if you don't have INSURANCE which is a bold faced LIE.
42Hainan, there is not a 16 to 18 percent increase in the cost for services every year.
People without insurance get emergency care, which is one of the most expensive things to get and could have probably been avoided had they had access to preventative care.
43You can have access to preventative care, they just choose not to pay for it. i think it is more a problem of miseducation than oh if I dont have insurance Im gonna die claims
44Just as an example here in our area, we have 3 FREE clinics... and 2 clinics (large ones) That offer sliding scale services based upon your income. If they need to have diagnostic tests, our hospitals honors the sliding scale given by these facilities. People like you just choose to believe the fear mongering and democrat talking points.
I think before the conversation sinks any further I'll check out...
45"People without insurance get emergency care, which is one of the most expensive things to get and could have probably been avoided had they had access to preventative care."
Thank you Roar. Also, once people have reached the point that need emergency care, their illnesses tend to farther along and harder to treat.
46As my comment showed, people do not have to get emergency care, there are MANY options available. Democrats want everyone to believe that is there only option. Die or bankruptcy when you finally have to go to the emergency room. If there was as much of a push for education about medical care options as there is for voter registration by ACORN then people might actually see what our great system has to offer instead of just believing democrat spouting points and waiting until you get sick.
47Hain, sorry I believe actual facts and not just your comments.
48I think bringing profits into the debate serve neither side, unless you want to talk about it in the context of show healthcare be a for profit business or a service provided to all citizens? Other than that debate point I'd rather neither side bring it up.
I would love to know about these people that get great health care without insurance, it was interested until you go ahead and start bringing up Obama's birth certificate and then ACORN. Those are topics irrelevant to the current one and just make you come across as partisan. Its very difficult to have an honest debate with someone that is so obviously biased, no matter what side of bias they are on JMHO
49Preventative care is actually more expensive than letting people go to the doctor when they get sick.
There are many reasons why healthcare costs go up each year. One is technology as Hainan pointed out. Another is healthcare fraud. They had a segment on 60 minutes last night about medicare fraud by medical device and drug companies. Malpractice insurance also adds a part to higher healthcare costs. Research and development for the new drugs that are always in demand add to the rising costs.
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