4 ms·
Well, in point of fact, the limit is actually a mandate on how much they must spend on medical care. Their own operating expenses, salaries, advertising, et c.,
by yamtaddle 4y ago
Well, in point of fact, the limit is actually a mandate on how much they must spend on medical care. Their own operating expenses, salaries, advertising, et c., have to come out after that. So they could theoretically make 15% under that limit—except in practice that's actually impossible. Which means margins aren't necessarily 5% because of competition.
[EDIT] That is, I'm skeptical that if one removed that limit, competition would keep margins where they are. Forcing all profit to come out of 15% of revenue probably does play a major role in keeping the actual margin as low as it is.
- johngladtj 4y agoIt also encourages healthcare price increases, since the best way for them to increase profits becomes increasing revenues, rather than reducing costs
- lotsofpulp 4y agoThe fact that they settle for sub 5% profit margins means they individually do not have the pricing power to do that. Clearly, a competing insurance company will steal business via lower premiums. I suppose one could assert they are all in cahoots and have a secret deal to accept low single digit profit margins to keep out of the news cycle, while simultaneously agreeing to pay healthcare providers more and more each year, but I would want proof.