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That would get in the way of unadulterated profit, you see.
by AdmiralAsshat 4y ago
That would get in the way of unadulterated profit, you see.
- ch4s3 4y agoHealth insurers in the US have a cap on how much of premiums can go to profits.
- wccrawford 4y agoDoesn't that just mean that they have an interest in keeping these costs high? The higher the costs, the larger that % is for the in absolute dollars. If all the costs come down, they are allowed to make less money.
- nimish 4y agoBingo. This is why they loved the ACA. Only allowed one scoop of ice cream? Great I'll use an enormous scoop.
- lotsofpulp 4y agoThat enormous scoop results in 5% or less profit margins. Compare to tech companies’ profit margins.
- CogitoCogito 4y agoSo? They're insurance companies. Why should they have high profit margins?
- lotsofpulp 4y agoI never wrote they should. I am disputing the notion that they earn huge profits (“enormous scoop”). Which is trivially disproven by looking at their financials.
- CogitoCogito 4y agoHow is it disproven exactly? Are you saying 5% is not a lot because it's the number 5 or something?
- lotsofpulp 4y agoFrom experience operating businesses and reading financials of various companies, 5% profit margin is on the low end. Walmart and other retail play in the 2% to 5% range.
- CogitoCogito 4y agoWhy would you compare such different businesses profit margins? Anyway I just think saying a 5% profit margin is small because other businesses have larger profit margins is kind of naive. I mean if through competition insurance companies' profit margins dropped to 2%, then the current status quo of 5% would seem crazy. It's all just a matter of perspective. Saying 5% is low because other businesses have higher profit margins doesn't make much sense since the businesses are totally incomparable.
- lotsofpulp 4y agoThe reason to compare it to other businesses is to see what kind of moat/regulatory capture/monopoly/monopsony power they have. For those purposes, a 5% profit margin indicates that health insurance companies do not have the pricing power that many other industries have. They actually have some of the lowest, which is fine, but then the claims of them being in control go out the window. Whether or not 5% itself is too high can be determined by looking at the competition. There are at least 7 other major publicly traded health insurers competing against each other, all with nearly the same profit margin. So either they are colluding with each other and there is corruption on a massive scale, or, the current parameters of the health insurance business simply result in a ~5% profit margin. If you think you can do better, then you are betting that you can do the job better than all the employees at these 7 companies, which is a lofty claim.
- 4y ago
- magila 4y agoYes, this is one of the more unfortunate unintended consequences of the ACA.
- tryptophan 4y ago"unintended" Insurance companies wrote the bill.
- ch4s3 4y agoParts of it, but it’s not clear that MLR was one of those parts or even a net positive for insurers.
- heavyset_go 4y agoInsurance costs were increasing at a higher rate each year before the ACA was passed or went into effect.
- ch4s3 4y agoThe rate of growth didn’t go negative or to 0, it just slowed down.
- heavyset_go 4y agoCorrect
- mypalmike 4y agoAre you implying that before ACA, insurers had an incentive to keep costs low?
- vanattab 4y agoIt may have been unintended but it was defiantly not unknown, I remember people pointing out this exact problem during the debate around ACA.
- Spooky23 4y agoYes. Although painted by reactionaries as a communist plot, ACA was modeled after Massachusetts’ “Romneycare”. It’s typical old school GOP policy of leveraging private sector actors with public sector dollars. It’s not awful policy, but did create bad cost incentives and encourages cartel like health networks.
- coredog64 4y agoIt’s called Romneycare because he got it implemented as a lightweight alternative to a pending proposal for more universal coverage. It’s also similar in nature to the Swiss system. Not a lot of GOP voters in Swiss cantons.
- ch4s3 4y agoYou don’t need to be a reactionary to see that it was very poorly written and that the implementation was even worse.
- jjeaff 4y agoIn a vacuum, that would make sense, but most of these insurers still have to compete with at least one or two other big players. So while you could increase your costs so that you can increase your premiums thus getting 5% of a larger pie, that assumes that you can increase your premiums without losing customers to competitors. For the most part, on the ACA marketplace, all the plans are pretty similar, so price is really your main differentiator. Perhaps the obstacles of switching providers makes this competition less of an issue.
- ch4s3 4y agoYes, I agree that price controls set by the state are a bad idea.
- daenz 4y agoIt seems like the cap should be unnecessary in the near future if we have full price transparency.
- throwaway12245 4y agoIt this a windfall profits tax?
- NaturalPhallacy 4y agoIIRC, it's 15%, meaning that they can only have $675,000,000,000.00 in profits. That is $675,000,000,000.00 they can take from us and instead of using for healthcare or even healthcare administration, it's just additional money that they took.
- lotsofpulp 4y ago> it's just additional money that they took. When did they take it? All the 10-Ks are showing me 5% or less profit margins.
- nicoburns 4y agoThey have low profit margins, but they massively overpay for the care, meaning that it's still incredibly inefficient.
- lotsofpulp 4y agoHow are you determining they massively overpay for the care?
- nicoburns 4y agoBy comparing to the prices paid for comparable care in other countries. And also by comparing what US hospitals charge insurers vs what US hospitals charge cash payers.
- lotsofpulp 4y agoOverpay means getting being able to get a better deal than you did. If it is 1 hospital in a 100 mile radius telling an insurance company to take it or leave it, how is it overpaying? Prices paid in other countries are irrelevant due to numerous factors, such as cost of living, purchasing power of local currency, legal liabilities, and most important, whether or not it is taxpayer funded healthcare which means all sellers are dealing with 1 buyer, which is the nearly the exact opposite of the US, where it is all buyers dealing with 1 seller (hospital or drug manufacturer who owns the patent).
- jjav 4y agoThat's a meaningless cap because you can decrease profits at will by increasing inefficiency and unnecessary costs inside the company.
- coredog64 4y agoIt’s called medical loss ratio (MLR), and insurers are required by law to spend 80-90% of premiums on medical care. They can get there by overpaying for care or by refunding money/charging less. But they can’t get there with increased internal administration spending.
- heavyset_go 4y agoPremiums are not the only source of revenue insurers have.
- uoaei 4y agoWould you like to provide a positive statement that coincides with this negative one?
- heavyset_go 4y agoCopays, deductibles, revenue from providers, etc.
- coredog64 4y agoThe copay goes to the healthcare provider, not the insurance company. That’s why it’s called copay: You are jointly paying the provider alongside the insurance company. A deductible is an amount of care that you’re solely responsible for. None of that money goes to an insurance company.
- foobiekr 4y agoThe problem with this approach, even before the ACA was passed, is that if you have a maximum profit fraction, the way to maximize profit in absolute terms is to just charge more and spend more - it encourages absolutely the wrong behavior in terms of costs management.