Paduda: Are Health Insurers' Profits and Costs the Problem?

Wednesday, August 21, 2019 | 0

There’s a lot of bleating about the huge profits made by health insurers, with some — including too many who should know better — complaining loud and long. Insurers and pharma netted about $97 billion last year.

Joe Paduda

While some would argue the billions raked in by insurers are far too much, let’s take a step back and look at the big picture.

First, insurers’ profits are a tiny fraction of our $3.6 trillion health care spend — as in less than 1%.

Second, health plans', insurers' and other payers’ total administrative expenses amount to 8.3% of that $3.6 trillion — roughly $300 billion.

Oh, and a big chunk of most health insurers’ business comes from servicing governmental programs. Example: 58% of United Healthcare’s revenue is from Medicare, Medicaid and other governmental programs.

Frankly, given commercial insurers’ demonstrated inability to control costs and improve quality, that $30 billion may be too generous by far. But it’s clear the big problem with health care costs is not insurer profits or administrative expense.

It’s the underlying prices of health care.

What does this mean for you?

It’s not insurer profits.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.