Greedy Insurance Profit Myth

On March 28, 2010, in Health Care In America, by admin

Your Host: Anthony Galvez

Author: Anthony Galvez

We have all heard from the President and the Democrats in the Congress that those waskilly Medical Insurance companies are making outlandish profits by mistreating their customers, namely us. The $12+ billion value is used most often.

I decided to see just how treacherous this group was and did some investigating. It turns out, the $12 billion value is correct for 2009 annual profits for the major providers in the US that provide the lion’s share of the coverage.

Man oh man does that sound like a lot of money. Let’s take a look at that for a minute. One of the most frequent complaints lodged by the President and the Democrats is the immoral profits that insurers make.

Let us presume that 275 million people of the United States are insured (we won’t say citizens because not all of the insured are citizens). We will agree to the figure thrown out by many supporters of the current health care legislation now under consideration by the Congress that 40 million are uninsured. That doesn’t affect the math but I don’t want anyone saying we are ignoring the facts.

Let’s dissect this into simple terms. $12,200,000,000 divided by 275,000,000. You take the outlandish profit and divide it by the number of people they have allegedly bilked out of a lot of money. Let’s do the math, you don’t need a fancy calculator. You can use the one on your cell phone.

  1. Let’s take those 6 zeros off of both numbers. 12,200,000,000 and 275,000,000
  2. That leaves 12,200 divided by 275
  3. That equals $44.36 profit per patient per year per insured.

Chuck Schumer scored a perfect 1600 on his SAT so I am surprised he never brought this fact to light.

Still, it is profit. So let’s see what they do to earn that money.

  • They have to get investors to give them money to open the Company,
  • They have to jump through bureaucratic hoops in each state to do business,
  • The have to comply with regulations that change (sometimes often and sometimes not often),
  • They have to clearly figure out what they can afford to offer their customers so they can 1) know what their liabilities will be and 2) make sure they have the money to pay for it,
  • They have to advertise to customers to provide this service/product because they don’t have a monopoly, they have some competition,
  • They have to get doctors to agree to take what they want to pay for a service (this helps them be competitive with other Insurers),
  • They have to hire employees (our fellow citizens) to handle all of the paperwork that is required to comply with the regulations from the State and Federal agencies,
  • They have to hire employees (more of our fellow citizens) to process the claims from their customers, us.
  • They have to do some tough decision making on who they can cover based on their respective health (pre-existing conditions) to make sure they have enough money to pay the bills of all of their customers and keep the company running for another day.
  • They have to set a limit on how much they can pay for any one person’s care. The sad truth is that no matter how much the Government or an Insurer wants to take care of someone, there is a point that no amount of money will save the patient.

I agree that the health care system and insurance policies needs to be reformed. I agree that there are some insurers that will deny coverage when they are obliged to cover the patient.  Medicaid and Medicare decline procedures also to contain costs.  To our politicians (Republicans and Democrats alike),  please lead us on the basis that we are smart enough to understand an issue on its merit, not its rhetoric.

What I don’t agree with is the use of figures to distort the facts for a cause. Insurers and Petroleum companies are the easiest targets because what they provide, we can’t live without for the most part and most Americans have to work to get ahead and it is not easy.

Let’s legislate to end worst practices. Let’s not legislate to look good for our neighbors, but provide no tangible benefit for them.

I will happily pay my $45 in profit for the services provided to me. For all those that will review the number of insured that I used, let me save you some time. If the number of insured is 1/2 of what I estimated, that only makes it $90 in profit per year. Still no problem for me. Sorry to disappoint the people that like to misrepresent the facts.


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