Is the world becoming uninsurable?

> Unfortunately these discussions almost never go well, because it seems that most people have at best a surface level understanding of what insurance is and how it works, and everyone is convinced that it's a full scam and insurance companies are fabricating everything

I have the exact same experience when discussing anything insurance related: People have wild assumptions about how much profit insurance companies are making.

When I ask people how much cheaper they think their insurance (health, home, etc) would be if we forced insurance company profits to zero they usually have some extreme guess like 50%. When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs they just don’t believe it. The discourse is so cooked that everyone who just assumes insurers are making unbelievable profits without ever checking.

Like you said, when I try to bring numbers into the discussion I get accused of being a shill (or a “bootlicker” if the other person is young).

The environment this creates has opened the door for some really bad politics to intervene in ways that aren’t helpful. I wouldn’t be surprised if the eventual outcome in a lot of these places is that politicians pass legislation putting the local government on the hook for insurance after they squeeze regular insurers so hard they have to back out to avoid losing money in those markets. The consequences won’t manifest for several years, potentially after the politicians have left office, but could be financially burdensome. Similar to how many local governments were very generous with pension plans because politicians knew the consequences would only be felt by their successors.

> When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs they just don’t believe it.

Meanwhile, the health care providers:

> But if you look at the list of companies with the highest [return on equity], you see health care providers or suppliers like HCA Healthcare (272%), Cencora (234%), Abbvie (84%), Mckesson (84%), Novo Nordisk (72%), Eli Lilly (59%), Amgen (56%), IDEXX Laboratories (53%), Zoetis (46%), Novartis (44%), Edwards Lifesciences (43%), and so on. If you want to know which shareholders are making the real money in the health care industry…well, it’s the shareholders of those providers and suppliers.

* https://www.noahpinion.blog/p/insurance-companies-arent-the-...

>When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs

Do you have any source for this?

I’m assuming (because HN) that you had the USA in mind, and it doesn’t pass the sniff test for me given that US insurance fees are more than single digit percentages higher than other high quality care countries with privatised healthcare systems

You can literally read the 10-K statement from any of several publicly traded medical insurance companies. Average industry profit margin is about 3%. There are also some non-profit insurers but their fees generally aren't any lower.

The issue in the US is that there is no price regulation for different procedures (other than Medicare), plus the providers (hospital chains) are intertwined* with insurance. The end result is everyone charges as much as they can and the premiums need to be high, even if insurance technically negotiates the rates down from the “sticker” price. Insurance companies are willing to take a small percent of profit because there is so much money being taken from customers.

* https://www.statnews.com/2024/11/25/unitedhealth-higher-paym...

These are all the publicly listed health insurers in the US, with public financials, so the numbers come from the 10-Q and 10-K reports filed with the SEC.

Note that the first one, United Health, has slightly higher profit margins than the rest because UNH has an enormous business selling healthcare itself, not just insurance (they own a lot of doctor groups and outpatient clinics and employ a lot of doctors and nurses).

https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...

https://www.macrotrends.net/stocks/charts/ELV/elevance-healt...

https://www.macrotrends.net/stocks/charts/CI/cigna-group/pro...

https://www.macrotrends.net/stocks/charts/CVS/cvs-health/pro...

https://www.macrotrends.net/stocks/charts/HUM/humana/profit-...

https://www.macrotrends.net/stocks/charts/CNC/centene/profit...

https://www.macrotrends.net/stocks/charts/MOH/molina-healthc...

The other big insurers will be Kaiser Foundation Health Plan and various plans franchised with Blue Cross Blue Shield, but they are all non profit.

https://projects.propublica.org/nonprofits/organizations/941...

Part of the problem is that the existence of the middle man adds a lot of costs: insurance company salaries, their executives, doctor's office billing coding, advertising, etc.

The shareholders take home only a fraction. But a lot of money gets spent that simply doesn't need to be. Other countries avoid the deadweight loss of the middle man.

Insurance fees are not high because the insurance companies are making huge profits.

They're high because providers are making huge profits.

Now granted, they may ultimately be the same thing, but that's a different discussion [1]

In the context of housing (fires, hurricanes etc) insurance is expensive because housing is expensive to build.

[1] insurance companies have to invest their income somewhere. It makes sense to choose companies will high returns. Which includes some health care providers. Which can basically change whatever they like because of structural reasons that have been well discussed.

The genius of the US way is that the politicians avoid the heat when healthcare coverage is denied. Whereas UK and Canadian politicians have to answer to their constituents.

Of course, now that getting murdered is on the table, the US health insurance executives might want to up their compensation.

The profit margin doesn't include things like CEO salary, correct? I could see a scenario where the issue is still corporate greed just not greed that's measured by profit.

Executive pay is such a tiny fraction that eliminating it would be lost in period to period fluctuations.

Health Insurance IS a huge racket. Insurance profits are only a small slice. Executive compensation isn't part of profits. The profits of the required sole source medical supplies company isn't part of insurance profits. The contracts, salaries, benefit packages, overpayments, and waste of healthcare systems and pharmaceutical companies aren't reflected in insurance profits. Just looking at the raw profit percentages returned to shareholders is absolutely meaningless.

You have to look at the entire healthcare picture and realize that insurance is the system driving the exorbitant costs. There is no legitimate reason for healthcare prices to be so insane.

All employee compensation, including CEO and board of directors, is included in the expenses used to calculate profit margin.

Profit margin is all revenue minus all expenses.

Right, low profit margins are not a valid argument for why it’s invalid for consumers to suspect there is some inefficiency compared to other markets. Saying the system must be efficient because profits are low is like saying boiling water should be as cheap as 98->99 degrees C because it’s just +1 C - profit margins aren’t as good an indicator of whether there is an unusual amount of disorder in the system, compared to extremely context-sensitive resource costs for hypothetically identical systems.

> Insurance fees are not high because the insurance companies are making huge profits.

United Healthcare alone made $23,000,000,000 in profit in 2023. Health insurance companies have collectively made $371 billion in profits since the passage of the Affordable Care Act.

Property & Liability insurance (home, car, etc) have relatively modest profit margins, but health insurance companies absolutely are making huge profits.

>Part of the problem is that the existence of the middle man adds a lot of costs: insurance company salaries, their executives, doctor's office billing coding, advertising, etc.

that's not a sophisticated analysis. it would be like saying mcdonalds is unecessarily expensive because executive pay, and cars, and dry cleaning, etc. etc. yet, if you tried to found a competitor, you'd have all those same expenses. even charities have to pay management.

insurance companies make money because their aggregate risk is less than your individual risk, and you really don't want your individual risk so you are willing to pay them extra, a premium, to get them to shore up your downside. After that it's like any other company selling any other thing.

Health insurance's issue is probably how it induces pure waste everywhere as everyone has to play this dance of ever escalating paperwork which consumes a lot of labor. It's not profit, it's waste. Same with the ever increasing amount of admin. Why is that admin increasing? I estimate insurance or requirements created by insurance is part of the cause.

There is also a lot of other smells of a lack of a competitive market. Very opaque pricing, limits to how many hospitals can be opened in a region, needing paperwork to push against that limit, limits in residency slots, the entire hazing ritual of residency in the first place, limits in opening medical schools, ever escalating requirements to become a doctor, restrictions against doctor owned hospitals or clinics, the fact something like an epipen is still not out of patent and not having many clones by now, large barriers to make medical devices and medications, while simultaneously having great issues with generic drug quality, a horrible food system compared to Europe, while simultaneously having a much harder regulatory state medically compared to europe, etc.

Some Blue Cross Blue Shield Association members are for-profit corporations now.

As for UnitedHealth Group, much of their profit comes from a large software business which is separate from their insurance, care delivery, and PBM businesses. If that software business was spun out it would be one of the 20 largest US tech companies.

no offence but that murder had nothing to do with what is right or caring for the people just a game same reason trains got graffiti on them. At most a beautiful lesson in the power that comes with controlling the narrative

> Some Blue Cross Blue Shield Association members are for-profit corporations now.

In this list, I couldn’t find a single for profit BCBS licensee other than Elevance. They all seem to be mutuals/member owned/non profit.

https://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Associa...

> As for UnitedHealth Group, much of their profit comes from a large software business which is separate from their insurance, care delivery, and PBM businesses. If that software business was spun out it would be one of the 20 largest US tech companies.

Interesting, I didn’t know UNH sold software!

> There is no legitimate reason for healthcare prices to be so insane.

these profit margins are why some people claim that the US is actually subsidizing the rest of the world's low cost health outcomes.

These companies make money in the US, at high margins, which enables them to operate at low margins in other more regulated countries.

> alone made $23,000,000,000 in profit in 2023

why is this number considered huge? What measure are you using? These absolute numbers are meaningless, because you have to put it into context. That's why profit margin is what analysts use, not the absolute number.

If i changed those figures to: they made $77 per person, per year in the USA for providing healthcare services, does that still seem as big? Or is it now reasonable?

$23,000,000,000 profit/29 million insured makes $793 profit per insured person.

That’s because healthcare is unusually expensive in the US, not because insurers’ profit margins are unusually high.

This might apply to Pharma, which actually operates in international markets, but not to US health insurers, PBMs, or for-profit Healthcare providers.

Definition of "healthcare provider" really confuses me. Why is my nurse lumped together with people researching drugs? Is the CEO of the hospital a "provider"?

This is spot on. It’s not that I think health insurance companies are making insane profit margins. It’s that their very existence in the system is a pure negative and in fact a moral blight. Inflicting profit into a system that is entirely dedicated to human health is by definition a conflict of interest for basically everyone involved, even if it operated at a hypothetical 100% efficiency.

No, UnitedHealth Group made $22B in profit in 2023. Only about half of that profit came from the UnitedHealthcare insurance business. The other half came from the Optum side which is a mix of non-insurance stuff. Optum makes huge profits on software: if the software business was spun out it would be one of the top 20 US tech companies.

https://www.unitedhealthgroup.com/investors/financial-report...

Lots of things necessary for life are run by for-profit businesses — for example, food production. Do farmers have a “conflict of interest”? What about healthcare in particular makes profit immoral?

You do realize health insurers have federally mandated caps on their profits, which simply incentivizes creative accounting to make money in more oblique ways, right?

  When you point out that, for example, health insurance profits are low
  single digit percentage of overall healthcare costs they just don’t
  believe it.

Or they see that as a cute bit of misdirection. Profits are capped as a percentage of healthcare costs, sure. Healthcare costs are not capped. Drive up the cost of care, drive up the profits.

You ever think it's curious that for-profit insurance companies pay out 2–3x what Medicare does for the same procedures?

  In this list, I couldn’t find a single for profit BCBS licensee
  other than Elevance.

Keep in mind Anthem/Elevance absorbed a bunch of licensees. So, for instance, Empire BCBS was for-profit but as of 2024 is part of Elevance.

At a quick glance Highmark and Wellmark are for-profit. And I believe the South Carolina licensee is as well. Mind you a few of the "non-profit" BCBS licensees have been sued over claims that they ought not be considered not-for-profit.

If the grocery store decides to remove the prices from everything, and require its shoppers to first call its billing department only open until 5pm to receive a set of numbers, then call their third party subscription service only open until 6pm to receive a non-binding estimate, for every item in their grocery list, then wait weeks or months for the grocery store to have its cashiers take time away from checking customers out to petition the third-party subscription service to allow its customers to buy any item deemed to require prior authorization…

You can typically endure hunger for 15 minutes for the time it takes to go to another food store.

On the other hand, if you are bleeding out in the ER, no such luxury exists.

Insurance executives have a fiduciary duty to maximize the profit of the company.

If the company makes a profit off of treating patients, then it has a financial incentive to not approve treatments that would make patients better.

If the company loses money treating patients, then it has a financial incentive to deny treatment as much as possible.

Unless a legal structure is found which scales profit with quality of care, ethical choices will be at odds with the fiduciary duty of the company officers. Having an AI say “no” and putting someone on hold is a lot less expensive than paying out for a cure that cost billions to develop.

In the case of government-run healthcare, the government at least sees the consequence of poor health outcomes in decreased productivity, competitiveness, gdp, and/or tax revenue, as well as increased use of social services.

In other words, if the insurance company refuses to treat you, it costs the government money to pay for welfare indefinitely, not the insurance company.

There are lots of perverse incentives at work, and vanishingly few people even try to understand them, I think because most people simply don’t believe it could possibly be as bad as it is. And by the time they learn otherwise, they care more about getting healthy again than overextending themselves trying to solve a massively complex problem.

Isn't that a bit misleading? Salaries wouldn't be included, but a lot of compensation at the very high end is based on owning stock, and dividends i assume would be part of that profit margin.

Using absolute numbers here doesn't really make sense. 23B sounds big but its impossible to say if its a high or low profit margin without context.

Oh yes, these things are exactly equivalent. Problem is, nothing about the health system's incentives aligns with consumer benefit. The most profitable outcome for an insurer is that everyone pays premiums and never uses any services. The most profitable outcome for hospitals is that they charge maximum prices for every service and yet don't really fix underlying problems or prevent future problems. Hospitals profit the most off patients that need a ton of care and have deep pockets. They lose money on giving care to people who cannot afford it and won't pay. They lose money in the long run when preventive care prevents later catastrophic (and expensive) conditions later. Pretty much all of the profit-maximizing forces in the for-profit system are deeply unethical.

If you're going to tell us that because health care providers and health insurance companies are some kind of magic counterbalance against each other that benefit consumers, uh, nope.

I think the point is more that the insurers are not the real target for your wrath. You should not motivate your congress person to do something about the insurance necessarily. It's probably better to look at a level further up the chain for example.

> Oh yes, these things are exactly equivalent

A: All men are tall, therefore Giannis Antetokounmpo is tall.

B: Your proof is wrong: see this man here, he isn’t tall!

A: Clearly he has nothing in common with Giannis. He’s not even in the NBA!

> When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs they just don’t believe it.

When you consider that single digit percentages of trillions of dollars is still an obscene amount of money it makes sense. People making tens of billions by applying formulas to spreadsheets and shuffling other people’s money around doesn’t sit right with most people.

That's huge isn't it? $800 bucks in profit per customer? What does Apple make? Or Unilever?

It’s profit and it’s very large.

That's going to be true for any nation wide insurance company.

Why compare to Apple, when the healthcare is arguably more complex and expensive?

Highmark is non profit:

https://projects.propublica.org/nonprofits/organizations/821...

Wellmark is a mutual insurance company (profits go back to policyholders, seems not comparable to a for profit insurance business, and for this discussion, is not going to have a profit margin that results in higher costs to policyholders):

https://en.wikipedia.org/wiki/Wellmark_Blue_Cross_Blue_Shiel...

https://en.wikipedia.org/wiki/Mutual_insurance

>Mind you a few of the "non-profit" BCBS licensees have been sued over claims that they ought not be considered not-for-profit.

I see no successful lawsuits, though. Still seems like Elevance is the only for profit BCBS licensee.

>In 2014, BC/BS of Illinois (Health Care Service Corporation) was sued over its nonprofit status. The lawsuit was dismissed, with prejudice, and the dismissal ruling was upheld on appeal.[62] Similar suits occurred with similar results in other states such as Oregon.[63]

Compensation, even in the form of equity, has an equivalent cash price that is owed at the time it is awarded. The receiver has to pay income tax for this compensation, even if it is not cash, and the business has to record it as an expense.

>and dividends i assume would be part of that profit margin.

Dividends and share buybacks are not expenses. They are not money spent for the purposes of operating the business, they are awards to the shareholders. As such, they are not an expense. Dividends and share buybacks happen with the profit, so they will never be included in expenses used to calculate profit margin.

There are lots of highly qualified people at the SEC and FASB working to ensure some semblance of accountability. There is a reason why people from all over the world want to invest in a developed countries’ public equity markets, and that is a belief that most of the time, the numbers are very close to the truth.

I hear the same thing about supermarkets. Their margins are razor thin (1-3%), and yet people look at the overall profits and complain, ignoring the fact that the company had to deploy 50-100 times that capital to make that profit.

An alternative is to split these companies into smaller companies, which will each have much lower profits but also higher costs due to lost efficiencies, but people will not be happy with that either.

To be clear if Elevance is the only remaining for-profit BCBS licensee it's because they bought the others.

Highmark got labeled as for-profit on its Wikipedia entry likely because they own a variety of for-profit companies including e.g. Highmark BCBSD Inc. and Celtic Hospice LLC.

https://projects.propublica.org/nonprofits/organizations/453...

>Pretty much all of the profit-maximizing forces in the for-profit system are deeply unethical.

Are you talking about healthcare specifically or businesses in general? AMD wants to make the best CPUs for the most amount of money. Is that "unethical"?

> healthcare specifically

Yes, it is deeply unethical that someone can be bankrupted and become homeless because of a treatable condition because the "market" has decided a price for the service that is astronomical without insurance, while at the same time tying insurance to employment, dividing up insurance markets, and making coverage subject to inscrutable, unappealable decisions made by people sitting behind desks in a completely different part of the country, while the leadership of said organizations and investors make higher profits than ever. It is deeply unethical that a CEO can make tens of millions of dollars--which for most regular people is several lifetimes worth of earnings--in a single year, while dealing in a market that regularly denies coverage to people who then suffer, are financially ruined, and die.

It's not the same as making a better CPU for more money. Not. At. All.

the original OP is claiming that the healthcare industry is too profitable. So you have to compare it to something to see if it is too profitable.

>People making tens of billions by applying formulas to spreadsheets and shuffling other people’s money around doesn’t sit right with most people.

The federal government will pay you $4.4 billion a year[1] if you lend them a trillion dollars, no "shuffling money around" required.

[1] current 5-year treasury yields

> Whereas UK and Canadian politicians have to answer to their constituents.

Yeah, and "politicians have to answer to their constituents" is how we got the failed insurance markets in California and Florida. This thread has now gone full circle.

> Or they see that as a cute bit of misdirection. Profits are capped as a percentage of healthcare costs, sure. [...]

You know what else is "a cute bit of misdirection"? Mentioning that profits are capped without mentioning why it's that way in the first place.

>You ever think it's curious that for-profit insurance companies pay out 2–3x what Medicare does for the same procedures?

...because the government low-balls healthcare providers?

That is the problem with conflating insurance and subsidy.

To buy votes, politicians sell “insurance”, but in reality it is a subsidy to a specific group of taxpayers.

When a government directly pays for healthcare, it can’t be called insurance, and so limits to the subsidy are easily attributed to the government leaders.

Whereas, if a government has the population buy “insurance” from non governmental entities, then it can pretend (for the layperson) that it isn’t a government subsidy and so the laypeople can blame limits of the subsidy on someone else.

Obviously, health insurance in the US is far from health insurance and premiums are closer to taxes being paid rather than premiums for one’s own health risks.

That isn’t so true in property and casualty insurance, at least not until governments like California step in.

>Health Insurance IS a huge racket. Insurance profits are only a small slice. Executive compensation isn't part of profits.

"Executive compensation" is even a "smaller slice" than profits, orders of magnitude smaller.

But Highmark, the parent organization, is still a non profit. Based on their revenue and expenses on their 990 going back a decade, the entire organization is not delivering profit to any owners, it’s just spending money earned in its for profit subsidiaries elsewhere in its org.

Specifics aside, I think it is conclusively shown that no health insurance / managed care organization earns a ton of profit margin. No one is going to become billionaire rich by starting up a managed care organization, because they will spend almost all they earn.

It’s such a low profit margin business, that Buffett, Dimon, and Bezos abandoned it:

https://www.healthcarefinancenews.com/news/haven-disbands-en...

>Isn't that a bit misleading?

In practice yes, but technically no. If a "non-profit" brings in 100 million dollars, and pays all 100 employees a million dollar salary, then that "non-profit" has made no profit. But when someone hears that a "non-profit" made "100 million" dollars, they think it is some kind of scam or something.

Right, but why use Apple ($800 phone every 2-4 years) compared to say, an automaker ($40k in depreciation over 10 years) or a REIT ($2000 in rent every month)? Moreover, why focus on absolute profits? If the healthcare industry split into 3 (eg. doctors, dental, drugs) but with the same margins, does that mean they're suddenly not "too profitable"?

Those people are not collecting the profits by moving their own money around.

They are just other things people commonly spend money on

  But Highmark, the parent organization, is still a non profit.

So? The Mozilla Foundation is non-profit but Mozilla Corporation is for profit. They're delivering profit, just with an added layer of indirection. In this case the Highmark parent is technically a non-profit but e.g. Highmark BCBSD, the Delaware arm, is a for profit BCBS licensee.

  ...because the government low-balls healthcare providers?

And yet Medicare is widely accepted. Go figure.

> They're delivering profit

To who? Are there shareholders profiting? Employees on the take?

> Unlike the non-profit Mozilla Foundation, and the Mozilla open source project, founded by the now defunct Netscape Communications Corporation, the Mozilla Corporation is a taxable entity. The Mozilla Corporation reinvests all of its profits back into the Mozilla projects.

https://en.wikipedia.org/wiki/Mozilla_Corporation

It’s the same with Highmark, assuming there isn’t massive fraud happening.

> Insurance executives have a fiduciary duty to maximize the profit of the company.

Probably not. Many insurance companies are not "for profit" companies(not a 501c3, something else). Certainly some are, but most of the giant ones, State Farm, etc are not. Most are Mutual Insurance companies: https://en.wikipedia.org/wiki/Mutual_insurance which handily includes a list of them.

I.e. they are operated more like Vanguard, the investment firm than they are Fidelity(a private for profit company) or Schwab a public for-profit company.

Also, this fiduciary duty thing is not really true, but people think it's true. They do have a duty to work in their shareholders best interests. Lately that's been taken to mean profit above all else, but that's a recent(last few decades) interpretation.

> If the company makes a profit off of treating patients, then it has a financial incentive to not approve treatments that would make patients better.

It depends on if they share the cost(s) of keeping patients healthy or not. Incentives matter. If they are incentivized to keep people healthy, instead of just treating X disease today, it would be a different conversation.

> In other words, if the insurance company refuses to treat you, it costs the government money to pay for welfare indefinitely, not the insurance company.

> There are lots of perverse incentives at work

Agreed. But mostly it's just excess waste as far as I know. I'm not an expert in healthcare, so I'm at best a armchair quarterback here.

I don’t think health insurance is actually insurance, but I have seen little evidence that it has “insane profit margins”. From what I’ve read, ‘health insurance’ has middling profit margins relative to other insurance specialties; where are you getting that view/data?

You can also become homeless because the market has decided that rent should cost more than you can afford (in a given area). This involves real estate, equity investing, home insurance, zoning, housing regulation, and banking. Is this equally immoral? How many types of business are similarly immoral?

>If the grocery store decides to remove the prices from everything, and require its shoppers to first call its billing department only open until 5pm to receive a set of numbers, then call their third party subscription service only open until 6pm to receive a non-binding estimate, for every item in their grocery list,

Good point (buying food would be a nightmare if it worked like American health care!) but that's a different argument from the one made above in the thread, that a profit motive in a vital good inherently creates perverse effects.

>When you point out that, for example, health insurance profits are low single digit percentage of overall healthcare costs they just don’t believe it.

It's not that I don't believe it, it's that this figure is completely unrelated to the damage and waste caused by the system of healthcare and health insurance we have in the US.

I mean, in a system of chattel slavery, you see above-normal profits competed away, but that in no way means the system isn't exploiting anyone, because that's not how the harm shows up! And yet still we'd see that argument get batted around in comments like yours:

"No, your owner can't possibly be exploiting you because, when you consider your purchase cost, he doesn't actually make much profit!"

$44 billion