Over the last several months as I have watched the Health Insurance debate bounce back and forth, one particular item has always bugged me a little bit. The pro-government health care advocates continually point to the “obscene” profits that the insurance companies supposedly make. This struck me as fairly odd since there are a large number of non-profit helath insurance organizations in the market that these private companies would have to comptete with. How could any company possibly turn a massive profit if it had to compete with a not for profit company selling the same products? Well, as it turns out, they actually don’t make a massive profit!
Reporters Calvin Woodward and Tom Murphy did a little fact-checking (thats gotta tick the administration off) and found that health insurance profits on average were far below other large companies (Tupperware, Coors, railroads, its a long list…). For example, communication network companies ran profits of around 20% compared to a little over 2% for the health insurance companies. Maybe the Democrats have a different dictionary than the rest of us, but I would hardly call 2% of ANYTHING obscene! And these people have the nerve to attack FOX news for distorting reality? Really?
The more I write about this one, the more ticked off I get. What is it going to take to make the bleeding heart wanna be do gooders realize that this is not about health care, its about power! The party that currently has control will do everything they can to gain as much power and grow government as much as possible while they control all three branches. As much as I dislike their ideology, I can not say they are stupid. They have an agenda, and they are following it. Its time for all the sheep to wake up and realize that the shepherd only takes care of them because they serve a more profitable purpose down the line.
Full text of Wooward and Murphy’s story here: http://apnews.myway.com/article/20091025/D9BI4D6O1.html
Rich
8 Comments
Rich, poor, dear, deluded right winger that you are, you missed the obvious problems in the argument. Woodward and Murphy take careful steps to average profits and to ignore some of the finer points.
First, Lobbying Costs are not discussed, but I will guarantee you they show up in the ‘Overhead’ category of an operating budget for each of these Private Health Insurance providers.
Second, Wal-Mart, typically No. 1 at the top of the Fortune 500 list averages between 2-4% profit, and thought the last 2 years have seen some goofy numbers (4 companies in the top 10 reporting losses) these numbers are still huge. The two health insurers at the top of the heap are Cardinal and United, Cardinal posted 2.1% in profits for 2007 and 1.4% in 2008 (Shown in the lists in 2008 and 2009) while United posted 6.2% and 3.7% respectively. This industry is heavy with administrative costs and with lobbying amounts close to $2 million dollars a day so far in 2009 that will cut into that profit margin heavily.
Third, they maintain these profits through shady dealings and unfair policies. They drop coverage on individuals that need it the most, deny claims for procedures based upon arbitrary rules and have a heavily administrative bureaucracy that maintains profit as their motivation. The bureaucrat you fear from Government denying you coverage or telling you how much your life is worth is already out there, but instead of making a call based upon law or regulation he is doing it with the bottom line first and foremost in his mind. Non-Profit organizations follow industry reimbursements and pricing, they stay competitive but cannot leap too far ahead because they cannot play similar games with their policies and the lives of those that pay into the system. It isn’t an even playing field.
Fourth, and possibly most important, let’s look at what they make a profit from, the pain and suffering of others. If they didn’t play shady and deceptive games, worked with the public and the Doctors to help reduce the administration costs by streamlining the paperwork done at the point of service (the Doctor’s Office or Emergency Room) this would not be the argument it has become, but because they have shown over the past 30 years that they are more interested in raising rates and fees and cutting services and patients from their rosters all in the name of profit, it just shows the darker side of capitalism. A side that can stand to be fixed.
Chris
Sorry, here are some sources, but there are plenty out there to put holes in the view Woodward and Murphy took with the numbers.
http://money.cnn.com/magazines/fortune/fortune500/2009/full_list/
http://voices.washingtonpost.com/health-care-reform/2009/10/health-care_lobbyists_continue.html?hpid=topnews
Chris,
I really don’t think that its fair to attack the health insurance companies based on the amount of money they spend on lobbying. Every large corporation spends a large portion of their capital on lobbying. Even most small businesses belong to larger groups which lobby for them. In a capitalist society where legislation has a profound impact on a company’s bottom line, this is simply a part of doing business. We can argue till the cows come home about the ethics involved or how much is considered “obscene” but I don’t think its fair to single out the insurance companies on this point.
Rich
I am not demonizing their lobbying, I accept to some degree that lobbying is necessary. I am just pointing out that the profit margins Woodward and Murphy indicated as not so big don’t necessarily represent the entire picture.
Businesses that have to maintain high numbers of personnel also have very high overhead, Retail companies and insurance brokers/agencies are two industries that maintain the largest numbers of personnel with low to medium wage income. In insurance, most of these individuals get benefits, vacation, etc. these all add to your overhead. Businesses that largely depend on technology or a mix of tech and personnel actually pay so much less in overhead. Same benefits (or better) and usually higher individual income but a much smaller operating cost for maintenance and repair/upgrade of the tech used. Occasionally they take a large hit in profits to replace large pieces of equipment or full scale upgrades but this does not happen often.
Comparing the Profitability of resource producers, communications companies or manufacturing to the insurance industry is erroneous at best and intentionally misleading at worst and are comparing apples to oranges, spider monkey turds or anything other than more apples.
I am not attacking anything other than their methodology for making a comparison.
Point taken Chris. Still, 2% is not obscene when compared to other similiar industries. Granted, we don’t rely on those industries for our health, but I would counter that argument with the fact that I don’t rely on my health insurance for my health either. I take care of that myslef and really only rely on the insurance for catastrophic care. Yes, people get cancer and other diseases and we need insurance to cover that kind of thing, but we have grown to expect far more from our insurance than I think we really need and this is a large part of what has driven costs upwards.
We could go on and on about this one but the bottom line is that more big government is not going to solve anything and in fact will likely make it worse.
Rich
I could counter that any profit on the pain and suffering of others could be considered obscene and though many our age do not depend on health insurance for our health, this will change as we get older. And as far as cancer is concerned, the newest trend by Blue Cross/Blue Shield and some other companies is to separate Cancer insurance from standard health insurance. You must now buy a second policy to cover cancer screenings and treatment.
Chris,
Interesting tidbit from “SuperFreakonomics” – during doctor strikes or loss from other issues (conferences) mortality rates in those areas actually go down, as much as 50% in some cases. You should get the book (get the first one also) lots of info applicable to things we talk about. I guess I should start a recommended reading list on here…
Rich
Freakonomics is already on my list of must reads. I will get to the second after I finish the first.
And that should make sense Rich, most deaths related to Doctors and Hospitals are derived from post-surgical secondary infections. No surgeries do to no doctors means no infections. Deaths due to prolonged illness or trauma would not show up as a difference in this statistic (the other 50% or more) but the part that drops off would be exactly what the numbers are pointing at.
This is why the numbers are goofy if you look at them the wrong way and can be very misleading. If the same number of deaths you mention are related to the number of surgeries performed you would see a similar rise and fall in their trends.
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