Do Health Insurance Companies Put Profits Over Patients?
By Marc Smith
October 8th, 2009 12:45pm
Much has been written and discussed surrounding the issue of health insurers putting profits ahead of patients. I am no apologist for the health insurers, but wanted to look at the numbers myself and see what I thought of the validity of those charges.
The first table below shows a group of major publicly traded health insurers. The second table is a random sampling of large US corporations in a variety of industries. I pulled the net income margin, total sales and CEO compensation for each company to see how they compared. The health insurance companies on average have substantially lower profit margins that the other set of companies. At an average profit margin of 3.2% vs 14.7% for the other industrial companies, the data suggest the companies really are not getting rich off poor, unsuspecting Americans.
I also looked at CEO compensation since excessive executive pay is often cited by the Obama administration and many members of Congress as one reason healthcare costs are so high. The average health insurer CEO earned total compensation of 0.056% of his/her companies’ total sales. While seven-figure incomes are easy to pick on in the media, there is just no factual evidence that CEO compensation has any meaningful impact on healthcare costs.
I do not think Americans should go bankrupt from a health disaster and do think something needs to be done about ‘pre-existing’ conditions. The reality is if someone chooses to not purchase health insurance during their 20s and 30s, then buys a package at 40 only to need significant benefits in the first few years, it creates an unsustainable situation for insurance companies. Healthcare has a cost and insurance companies cannot stay in business unless they consistently collect more premiums than the claims they pay.
This is a great article on the examples Obama used during this Congressional address on pre-existing conditions and coverage rescission. It shows facts and stats that suggest the rescission of coverage is nowhere as big a problem as is often portrayed.
Please email all thoughts to marc@marcdown.com.
