Sunday, November 01, 2009

Sen. Reid on Health Insurance Profits

As for insurance companies, “There isn’t anything we could do to satisfy them in this health care bill. Nothing,” Senate Majority Leader Harry Reid (D-Nev.) said. “They are so anti-competitive. Why? Because they make more money than any other business in America today. . . .What a sweet deal they have.”

From Jeff Jacoby's new column "Hyperbole and the Health-care Debate," where he cites the 3.3% profit margin for "health care plans" and its industry ranking of #86 that I have previously posted about.

Update: In response to a comment that return on capital is more important than profit margin, here are the industry rankings by "Return on Equity," showing that "Health Care Plans" ranks #52 with a 13% ROE.


At 11/01/2009 3:17 PM, Anonymous Anonymous said...

Margin is meaningless in insurance, it is return on capital that matters.

Also, margin is after executive compensation. At one time, one out of 780 dollars of healthcare expenditures were for the compensation of William McGuire, former head of United Healthcare.

At 11/01/2009 3:34 PM, Blogger KO said...

Wait, I thought oil companies make more profit than any other companies? I'm all confused about who I should hate, so how about I just blame the messenger.

Why hasn't Senator Reid done anything about the exploding costs and fraud in Medicare and other handouts? The insurance companies are solvent. It is the the government programs that constantly outrun cost projections.

While I pay reasonable premiums for my healthcare, I pay outrageous taxes for Medicare and Social Security. And clearly, either those taxes have to go up, benefits down, or both by the time I'm eligible for benefits.

At 11/01/2009 3:37 PM, Blogger Mark J. Perry said...

Anonymous: Post has been updated with Return on Equity rankings, showing "Health Care Plans" at #52.

At 11/01/2009 4:54 PM, Blogger W.E. Heasley said...


“I'm all confused about who I should hate, so how about I just blame the messenger.

Why hasn't Senator Reid done anything about the exploding costs and fraud in Medicare and other handouts?”

That’s pretty good OA!

Maybe this puts Uncle Harry’s ridiculous assertion of Health Care Profitability in perspective: Several years ago Prudential sold its entire Health-Care business to Aetna. Why? Prudential determined that they had so much money tied up in providing Health Care/Health Insurance, and that their investment was yielding such a low profit margin (3%) and a low ROE, that they would be better off getting out of the business and placing the proceeds in just about any other investment and improve their profit margin and ROE.

At 11/01/2009 5:06 PM, Anonymous Anonymous said...

It would be nice to see a breakdown of premiums paid, payout on premiums, admin costs, value of assets held as required by law, and profit. I get the feeling the profit mostly comes from the assets.

At 11/01/2009 5:19 PM, Anonymous Mark said...

Profit margins are very relevant. It represents the amount of savings the customers would have if there were no profits. Health insurance customers could save a whopping 3.3% if *all* health insurance company profits were eliminated, and it would do absolutely nothing to control the rapid rise in health care costs.

At 11/01/2009 7:15 PM, Blogger QT said...

Nice to see that my fellow bloggers have spotted that this is about politics and not economics.

No one seems to be buying into Harry's populist message.

"I'm all confused about who I should hate"

Bingo! OA

At 11/01/2009 7:53 PM, Anonymous Anonymous said...

Not only is this about politics, no one is bring freedom of choice to the table.

At 11/02/2009 10:13 AM, Blogger Noumenon said...

The commenters at Marginal Revolution thought RoE was the best measure for insurance companies, so I'm much obliged to you for looking up that measure.

Does anyone understand why cigarette companies appear so profitable by that measure, or why so many industries are ranked at 0.0?

At 11/02/2009 5:56 PM, Blogger read it said...

"Not only is this about politics, no one is bring freedom of choice to the table."

Michael, one guy is.

The eminent thinker Slavoj Žižek tells Jonathan Derbyshire why he rejects mainstream political theory, why he supports Barack Obama, and why we need Marx more than ever.


"I am a Leninist. Lenin wasn’t afraid to dirty his hands. If you can get power, grab it. Do whatever is possible. This is why I support Obama. I think the battle he is fighting now over healthcare is extremely important, because it concerns the very core of the ruling ideology. The core of the campaign against Obama is freedom of choice. And the lesson, if he wins, is that freedom of choice is certainly something beautiful, but that it only works against a background of regulations, ethical presuppositions, economic conditions and so on. My position isn’t that we should sit down and wait for some big revolution to come. We have to engage wherever we can. If Obama wins his battle over healthcare, if some kind of blow can be struck against the ideology of freedom of choice, it will have been a victory worth fighting for."

I found that from entitledtoanopinion blog.

At 11/03/2009 5:52 PM, Blogger juandos said...

Thank you silly girl for those two links...

Nice bit of education...


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