This is why I honestly don’t believe that reporting profits as 3.3% makes any sense. No one would go to the trouble of running a giant business or investing in it for 3.3%. 3.3% is what you get for doing no work whatsoever. Also, 3.3% is so small that it ought to be wiped out by random factors: lawsuits, cost overruns, windfalls. Nothing as messy as a big corporation should be expected to produce profits that reliable.

Call me willfully ignorant, but I am not gonna believe that competition in every one of the vast oligopolies in every industry is so tight that profit margins are competed down under 10%. Someone is getting paid better than that, they’re just not calling it “profits.”

I thought it was property and casualty companies that made investment income. Health insurance companies don’t get to hold onto the money as long because claims are fairly steady.

Incidentally, I think Obama et al probably also do not understand the difference between underwriting gains (the difference between premiums and claims paid) and profit, which is what is left after administrative costs are taken out and the dividend/underwriting gain paid back to the client. No, health insurance companies don’t get to keep all the extra if they vastly overestimate the premium required. For larger companies that aren’t already admin services only, there is (or used to be, in the late 80s when I worked for Prudential Ins) a dividend that was paid to the client.

— Yesterday during a town hall meeting, President Obama got his facts
completely wrong. He stated that a surgeon gets paid $50,000 for a leg
amputation when, in fact, Medicare pays a surgeon between $740 and
$1,140 for a leg amputation. This payment also includes the
evaluation of the patient on the day of the operation plus patient
follow-up care that is provided for 90 days after the operation.
Private insurers pay some variation of the Medicare reimbursement for
this service.

— Three weeks ago, the President suggested that a surgeon’s decision to
remove a child’s tonsils is based on the desire to make a lot of
money. That remark was ill-informed and dangerous, and we were
dismayed by this characterization of the work surgeons do. Surgeons
make decisions about recommending operations based on what’s right for
the patient.”

consider a lemonade stand. if you sell $100 worth and make $10 profit, that’s a 10% margin.

if you merge with another lemonade stand, that was having trouble and was selling $100 of lemonade at $5 profit, now, you are a $200 lemonade empire with $15 in profit.

so, $15 is record profits, but as a % of revenue, it’s 7.5%, down from the 10% you used to get. so it’s difficult to argue that you are somehow greedier and making record profits by gouging customers. your returns have dropped.

health insurance companies have been merging at a tremendous rate over the last couple of years. mostly, this is being driven by margins being so low that they are having trouble surviving on their own.

to portray an industry that is being driven to consolidation to survive low and deteriorating margins as profit gouging is patently absurd.

it seems to me that there are only two possible explanations for this curious tactic:

1. the president and congressional leaders are utterly ignorant of economics/business and literally have no idea what they are talking about

2. they are deliberately lying to gather support for their policies.

neither scenario fills me with a great deal of confidence.

There is competition. It comes from the other insurance companies. Want to increase competition? Decouple health insurance from employment so that individuals can choose their own companies and policies instead of being limited to a small list provided by the employer.