One small (but major) nuance: the 80/20 rule applies specifically to the _insurance_ business. So what's another way to increase profits in addition to letting

One small (but major) nuance: the 80/20 rule applies specifically to the _insurance_ business. So what's another way to increase profits in addition to letting care spending keep creeping up? Add non-insurance lines of business to the company, i.e. vertically integrate by acquiring some of the middle men you're paying. Insurers snatching up PBMs[1] (or in some cases, PBMs snatching up insurers) is one insidious example. For those unfamiliar, PBMs are the companies that manage your prescription benefits. Insurers negotiate a predictable rate card with the PBM for the drugs on their formulary, insulating the insurer from market and regional pricing volatility. The PBM then negotiates with all the various pharmacies on actual prices. So when you purchase a prescription: 1. You pay your share (a fixed copay for many plans) 2. If the price the PBM negotiated was more than your copay, the PBM pays the pharmacy the difference 3. The insurer then pays the PBM whatever pre-negotiated rate they have for that prescription With the PBM deriving their revenue/profit from the spread they're able to generate in the process[2]. But when the insurer and PBM are one-in-the-same, that spread is really just an inter-company accounting transfer that ultimately rolls up to the same P&L. But it's a _magical_ inter-company transfer, as the insurer side of the books count it as a medical cost (part of the 80% spending requirement) and the PBM side of the books (that show it as revenue) aren't subject to the 80/20 requirements. And best of all, the insurers spent so many years letting cost inflation run rampant[3] that such egregious slight-of-hand easily passes the arms length test for transfer pricing[4]. [1] https://www.statnews.com/2018/06/01/mergers-health-insurers-pharmacy-benefit-managers/ https://www.statnews.com/2018/06/01/mergers-health-insurers-... [2] They also have other revenue streams, such as squeezing rebates out of drug manufacturers as well. But the simplified scenario above covers the gist of things, and illustrates the primary conflict of interest involved. [3] As [1] mentioned with the CVS/Aetna example, PBMs can be far more profitable than insurers. CVS generated 2.5x more profit than Aetna when they merged. [4] https://blog.freedmaxick.com/summing-it-up/got-intercompany-transactions-transfer-pricing-under-increased-scrutiny https://blog.freedmaxick.com/summing-it-up/got-intercompany-...