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>How can I start an insurance company? One requirement is to be willing to earn returns less than SP500. Look up profit margins and annual returns for UNH, El

>How can I start an insurance company? One requirement is to be willing to earn returns less than SP500. Look up profit margins and annual returns for UNH, Elevance, CVS, Cigna, Humana, Centene, and Molina. You have a billion laws to follow, you’re used as a punching bag by politicians and customers, have to get the price of your service approved by a government employee, and for all of that, you earn a 2% to 3% profit margin.

whatever1 1y ago
No it will be a zero profit company. All of the revenues will go to my compensation and bonuses.
Taikonerd 1y ago
> for all of that, you earn a 2% to 3% profit margin. Yeah -- it seems like a paradox that the insurance companies charge so many people so much money, yet struggle to make a profit. I've heard that they spend a lot of money handling their "internal friction" -- reviewing claims, handling appeals, etc.
- lotsofpulp 1y ago
  Health insurance premium revenue = medical loss ratio + operating costs + profit margin Medical loss ratio is the money paid to healthcare providers. Operating costs end up being ~10%, across multiple publicly listed companies. This fact, plus 2% to 3% profit margins means any more cost reductions have to come from legislation, reduction in healthcare prices, or advances in automation. https://www.oliverwyman.com/our-expertise/insights/2023/mar/health-insurer-financial-insights-volume-11-p1.html https://www.oliverwyman.com/our-expertise/insights/2023/mar/... https://www.kff.org/private-insurance/medical-loss-ratio-rebates/ https://www.kff.org/private-insurance/medical-loss-ratio-reb...
nullocator 1y ago
Uh huh, and for them to have inserted themselves between me and my doctor, what exactly did they contribute to the transaction and how much should I want to pay for such a privilege since apparently $30k a year isn't enough? A measly 2-3% for adding no value and creating friction, egregious, we must get the profits higher!
- lotsofpulp 1y ago
  First of all, some or much of your premium is a wealth transfer (from young and healthy to old and sick). So consider that portion a tax (it literally is, just not collected by the government directly): https://news.ycombinator.com/item?id=45800973 https://news.ycombinator.com/item?id=45800973 https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms https://www.cms.gov/marketplace/private-health-insurance/mar... https://www.healthcare.gov/how-plans-set-your-premiums/ https://www.healthcare.gov/how-plans-set-your-premiums/ >what exactly did they contribute to the transaction Obviously this varies based on personal experience, but the biggest benefit is usually covering the big expenses beyond the out of pocket maximum, such as premature babies, bypass surgeries, cancer treatments, hemophilia treatments, etc stuff that costs hundreds of thousands and millions of dollars. Second would be negotiated pricing with healthcare providers. If you think you can do a better job negotiating, you are welcome to not pay the health insurance company (better referred to as managed care organizations), and see what kind of deals you can get. Third would be services as an agent that knows something about healthcare to be able to discern necessary and unnecessary care, since most buyers are unable to discern that information. This is, of course, highly subjective based on personal experience and the lack of government audits here leaves much to be desired. >how much should I want to pay When you have 7 publicly listed managed care organizations along with numerous non profits such as the various BCBS and Providence and Kaiser Permanente all selling insurance at roughly the same price, it's sufficient to conclude prices are about as low as they can get in this business environment. >A measly 2-3% for adding no value and creating friction, egregious, we must get the profits higher! This sentiment really doesn't make sense, unless the goal is to just be outraged for the sake of being outraged, because it has been clearly shown that there aren't much profits to be had in the first place. It's such a shitty business that one will end up with more money by investing in SP500.
  - nullocator 1y ago
    I think my sentiment is that with single-payer we could go from arguing about how expensive health care is and how much money should middle-men be able to extract from the system, to mostly just arguing about how expensive health care is.

whatever1 1y ago

No it will be a zero profit company. All of the revenues will go to my compensation and bonuses.

Taikonerd 1y ago

> for all of that, you earn a 2% to 3% profit margin. Yeah -- it seems like a paradox that the insurance companies charge so many people so much money, yet struggle to make a profit. I've heard that they spend a lot of money handling their "internal friction" -- reviewing claims, handling appeals, etc.

lotsofpulp 1y ago
Health insurance premium revenue = medical loss ratio + operating costs + profit margin Medical loss ratio is the money paid to healthcare providers. Operating costs end up being ~10%, across multiple publicly listed companies. This fact, plus 2% to 3% profit margins means any more cost reductions have to come from legislation, reduction in healthcare prices, or advances in automation. https://www.oliverwyman.com/our-expertise/insights/2023/mar/health-insurer-financial-insights-volume-11-p1.html https://www.oliverwyman.com/our-expertise/insights/2023/mar/... https://www.kff.org/private-insurance/medical-loss-ratio-rebates/ https://www.kff.org/private-insurance/medical-loss-ratio-reb...

nullocator 1y ago

Uh huh, and for them to have inserted themselves between me and my doctor, what exactly did they contribute to the transaction and how much should I want to pay for such a privilege since apparently $30k a year isn't enough? A measly 2-3% for adding no value and creating friction, egregious, we must get the profits higher!

lotsofpulp 1y ago
First of all, some or much of your premium is a wealth transfer (from young and healthy to old and sick). So consider that portion a tax (it literally is, just not collected by the government directly): https://news.ycombinator.com/item?id=45800973 https://news.ycombinator.com/item?id=45800973 https://www.cms.gov/marketplace/private-health-insurance/market-rating-reforms https://www.cms.gov/marketplace/private-health-insurance/mar... https://www.healthcare.gov/how-plans-set-your-premiums/ https://www.healthcare.gov/how-plans-set-your-premiums/ >what exactly did they contribute to the transaction Obviously this varies based on personal experience, but the biggest benefit is usually covering the big expenses beyond the out of pocket maximum, such as premature babies, bypass surgeries, cancer treatments, hemophilia treatments, etc stuff that costs hundreds of thousands and millions of dollars. Second would be negotiated pricing with healthcare providers. If you think you can do a better job negotiating, you are welcome to not pay the health insurance company (better referred to as managed care organizations), and see what kind of deals you can get. Third would be services as an agent that knows something about healthcare to be able to discern necessary and unnecessary care, since most buyers are unable to discern that information. This is, of course, highly subjective based on personal experience and the lack of government audits here leaves much to be desired. >how much should I want to pay When you have 7 publicly listed managed care organizations along with numerous non profits such as the various BCBS and Providence and Kaiser Permanente all selling insurance at roughly the same price, it's sufficient to conclude prices are about as low as they can get in this business environment. >A measly 2-3% for adding no value and creating friction, egregious, we must get the profits higher! This sentiment really doesn't make sense, unless the goal is to just be outraged for the sake of being outraged, because it has been clearly shown that there aren't much profits to be had in the first place. It's such a shitty business that one will end up with more money by investing in SP500.
- nullocator 1y ago
  I think my sentiment is that with single-payer we could go from arguing about how expensive health care is and how much money should middle-men be able to extract from the system, to mostly just arguing about how expensive health care is.