Excessive Health Care Profits

Monday, August 3, AD 2009

In the health care reform debate, we often hear about how huge amounts of money that could be going to provide people with treatment is being sucked up by insurance company profits instead. This kind of thing always makes me wonder, since in my experience a competitive market place will usually drive profit margins down pretty low. So I thought it would be illustrative to look up how much money the top private insurance companies make, and then determine their profit margins and profits per enrollee.

The following information is publicly available on Google Finance. Revenue figures are annual ones for the year ending 12-31-2008. The total revenue, income before tax and income after tax figures come directly from each companies public financial reports. The enrollee figures are potentially slightly more approximate, since there I googled for the most recent press release which showed total enrollment for each company.


It struck me as interesting that it was Humana, with the lowest profits per enrollee in 2008, which just posted a healthy profit increase for Q2. Wellpoint and Aetna have suffered membership declines in the last quarter.

In no case is the company making more than $100 per enrollee per year in profits. Given that most insurance plans cost a good $4000-$6000 per year, the amount of what we pay for insurance that goes to “lining insurance companies’ pockets” would seem to be fairly small.

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