There are many faults to be found with the health insurance industry, but excessive profits is not one of them, as Woodward accurately points out. Consistently over the years, profit margins have averaged about 4 percent. It varies somewhat, which is why we occasionally hear misleading claims about percent increases in profits based on a starting era when they were making hardly any profit at all. Insurer profits account for less than 2 percent of overall health care spending, and so if industry profits were eliminated entirely, the savings would be small. It is also true that industry CEOs are overpaid, but again, the consequence to the public is minor. The total of profits plus overhead (including salaries, advertising, marketing, etc.) has tended to run about 15 percent or a bit more (probably 6-7 percent of overall healthcare spending), and so if this overhead were reduced to levels in single payer nations, the savings would again be small. Looked at another way, medical loss ratios (the fraction of premium dollars spent on actual medical servies rather than profits and overhead) had generally tended to be above 90 percent for group markets and 60 percent for individual markets (much more costly to administer), with the average between 80 and 85 percent.

Is it "obscene" for insurers to make any profits at all? That's a philosophical issue, but the empirical evidence demonstrates that profit-making private insurance is compatible with excellent, affordable, universal healthcare, as practiced in the Netherlands as one example. The Netherlands have achieved this not by eliminating profits, but by tight regulation of insurance practices that eliminates many of the abuses and inequities American insurers continue to perpetrate.

If one wants to condemn the insurance industry, it makes sense to get the fact right, because making false accusations is likely to backfire sooner or later.

These days, when things are going well you take the 'profit' number for the corp and multiply it by two to find the true profit for the corp since management takes the top half before the shareholders see a dime.

We don't need insurance companies at all. That we do is testimony to big money corporate corruption, who buy the whores in our governing bodies. It is time for a revolution, to bury the corporatist whoremasters and their whores, and put the people back in charge. And if you think this is all bullshit, just look around. Take ten minutes and read and try to understand what our situation is. This country is done if we the people put up with this crap.

That's not correct, Cindy. Current medical loss ratios are above 80 percent, and some estimates place them at about 85 percent. In addition, many states already mandate floors on medical loss ratios, and the currently proposed bills also includes a floor (I believe it's 85 percent) in the House bill and possibly the Senate HELP bill. Health insurers are guilty of many unfair practices, but excessive insurer profits are not the main problem. See the link in my comment above for additional details.

Great response. I have no patience for this diddling over how poor the health insurers are compared to how poor the other billion dollar profiteers are. The bottom line is that the people in the industry making the decisions that essentially murder their own policy holders for obscene profit are the ones who also happen to be raking in said obscene profits.

But Fred will continue to beat a dead horse with the dead horse he beat the day before, though you have to hand it to him for putting his horsecrap out there so eloquently. Infuriating, yet admirable.

It's always fun to take an agumentative position and follow it through to its conclusion.

Those poor, miserable health insurance people are making pathetic profits. This is a sign of a failed industry. Clearly the health insurance industry is dead and just doesn't know it yet. How CAN it survive with all those expenses? Why are these people spending billions in lobbying to save a withering institution. Let's just put insurance out of its misery. It's the merciful thing to do, afterall, because their profits are so meager and they work so hard for next to nothing. A Fair Trade Organization has determined that those people in the health insurance industry are oppressed and their work/compensation is so meager as to be criminal. It must be stoppped. It's just plain wrong.

There, now wasn't that fun?!?

Oleeb - Thanks for posting that link. It makes the same points I've made above about the level of insurer profits and overhead, and in fact, the numbers it gives for insurer profits per se and as a percent of total healthcare spending are very similar to mine (insurer profits are a very low percent of total healthcare costs). It also makes the same point I made earlier when I stated that medical loss ratios are between 80 and 85 percent. In other words, insurer profits are low enough to leave little room to squeeze for much in the way of healthcare savings.

It's important not to conflate anger against insurers for inequitable practices and false claims with the invalid assumption that their profits are high. They're not.

Fred, I admire your doggedness on trying to correct the constant misinformation on this point. But I wonder about your vision, in that you can't see that you can try to point it out until you are blue in the face, but so many are not going to change their mind on this until they get the sticker shock at the premiums required for a public option that is revenue neutral.

I have come to the conclusion that this is what was intended all along by planners of the Obama and Clinton campaign incremental reform proposals, that you have to let people learn at their own pace that the profits of insurance companies is not the main problem we face, that getting rid of those profits would just be a tiny drop in the bucket of the profit drive in our system, and that managed care is actually what they both need and want despite the bad name insurance companies gave it some time ago.

You know, I've been thinking on the seniors saying "hands off my Medicare!" What too many under 65 don't realize that when they are saying it, many are saying it partly because as they see it, they paid for that insurance in advance for 40+ years, and want exactly what they were promised for all those payments that could have gone elsewhere.

Sticker shock when you remove insurance co. profits is coming next, I think that's actually the next step in the reform plan. Those in the administration who thought loss of a public plan wasn't that big of a deal at this point in time were probably not relishing that poltically, preferred slower going for that reason more than any other.

It's really amazing how an otherwise smart guy simply refuses to get it. Fred, the profits these guys make are gigantic. There's just no two ways around it. To view it from the myopic lense of profit as a percentage of revenue vs looking honestly at the hoard of money they make for themselves is just absurd. They make billions Fred, billions in profits and that is by defnition obscene no matter what their friggin percentage of profit is. How you take justification for your argument out of an article that demonstrates the industry is lying about it's obscene profits is incredible.

Their after tax profit is nothing compared to the amount of money they just flat throw away on bullshit stuff that is written off as business expenses. I don't remember the numbers off the top of my head, I've seen them published in articles, but the money they spend on marketing alone is obscene. Not to mention the huge sums the industry spends on lobbying efforts. Then there is all the money they spend for boondoggle conferences all over the place doing who knows what. They blow more money on useless stuff than most people can even imagine. Having people or departments whose sole purpose is to figure ways to screw customers is a bit of a waste too.

See my comments above on medical loss ratios. Most of the premium dollar is spent to pay for medical services, with the remaining 15-20 percent used for profits and overhead, including all the items you mention. It's more than necessary, but not nearly as much as you may have been led to believe.

You are right that insurers employ staff to identify cost cutting measures that often deprive subscribers of needed care. Proposed reforms are designed to rectify this abuse, but this is mainly a fairness issue rather than an issue of high insurer profits. Eliminating these staff practices will be emotionally gratifying, but it won't save too many dollars out of the healthcare budget.

That's incorrect. Overhead is typically less than 15 cents, and the total of overhead plus profits (i.e. everything that doesn't go to pay for medical services) is 15-20 cents.

It's in links provided above by Oleeb. You are welcome to cite your own data sources, but I think you'll find that the numbers I gave are correct.