The Glade 4.0

It’s like they’re just telling a bunch of lies to justify a power-grab or something.

FACT CHECK: Health insurer profits not so fat

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.

___

Associated Press writer Tom Murphy in Indianapolis contributed to this report.

I don't think it's so much lying as the unstated belief that profit is at best unnecessary and at worst, immoral. This goes double with any product or service that people deem a "necessity". Despite claims not to be opponents of the market or free enterprise, any buisness-related issue always contains at least a token level of condemnation of "profit". The left tends to ignore the fact that "profit" is what keeps the buisness running at all, and it is not simply money being horded in a Scrroge McDuck-like money vault or in executive paychecks, but ais what keeps the retirement, savings, and investments of the middle class and even many working poor healthey.

Look at the adjectives used: "Immoral" and "obscene" profits. There is clearly no mathematical formula that will tell us when profits are immoral or obscene, and the users of such words are not even being pressed for their own definition which, while subjective, could at least be submitted to the public for a test of reasonability. They don't because few people would really call 8% or 6% profits "obscene" or "immoral". No, they rely on the total subjectivity and vagueness of the claim, and of pressed on it would probably claim that any profit made on healthcare is obscene if not everyone has it or some such nonsense.

Of course, taken to its logical extreme, doctors should be wards of the state, held in prisons, and payed a few cents an hour at most, but no one's going to reduce the argument to absurdity in public that way, unfortunately.

Although, that last scenario (prisoner doctors forced to work for the State) is ultimately the result of their claim that any profit made as a result of healthcare being obscene in the context of non-universal coverage.

I don't think it's so much lying as the unstated belief that profit is at best unnecessary and at worst, immoral.

Margins only tell a part of the story. Actual earnings have a lot to do with it as well.

However, this goes to show that the industry is pretty inefficient.All the more reason to nationalize it, imo.

Margins only tell a part of the story. Actual earnings have a lot to do with it as well.

However, this goes to show that the industry is pretty inefficient.

As far as efficiency, far-left liberals also pretty much 100% believe that the public option will cost nothing in the long run. I am not making this up, they think that private insurance is making so much of a killing and hiding their profits that the public option will pay for itself by not doing this.

Even in the face of the fact that the current method of funding it would require cutting Medicare and raising taxes now while benefits wouldn't start for years to come? I guess I shouldn't be surprised.

Even in the face of the fact that the current method of funding it would require cutting Medicare and raising taxes now while benefits wouldn't start for years to come? I guess I shouldn't be surprised.

Glad you made it back X.

I've recently become very disillusioned with the liberal position on health care. Nobody wants to be even remotely honest on what public health care is, it has to be better than private health care in every conceivable way with no drawbacks.

Do you have any actual evidence to show that this is actually an overall belief? There are people that think profit *for healthcare* is just as immoral as a for profit police force might be, but that's not the same thing as saying that profit in and of itself is immoral and unnecessary.

Margins only tell a part of the story. Actual earnings have a lot to do with it as well. However, this goes to show that the industry is pretty inefficient.All the more reason to nationalize it, imo.

Xequecal,

Would you expound a bit on your thoughts? After reading what you wrote, I suspect that I don't fully understand.

You are saying you want to nationalize a system to make it effecient?

Also, why should DE have to provide evidence? He prefaced that statement with "I think".

Well, yes. Medicare is incredibly efficient, having a tiny overall cost in terms of administration compared to private companies, and no need to make a profit at all. It's more efficient than any of the private companies out there. Frankly, I think they should simply remove the age restriction on medicare and allow anyone under the current age of enrollment to pay a premium for benefits.

Yes, Medicare is significantly more efficient in terms of overhead cost. Medicare operates at about 3% total administrative costs, while private companies have about 30% total costs including their profit. Medicare is about 10 times more efficient than private companies.