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Thread: FACT CHECK: Health insurer profits not so fat

  1. #11
    Senior Member Gerry Clinchy's Avatar
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    Yardley
    Families USA learned that insurers in the individual market sometimes maintain medical loss ratios of only 60 percent,retaining 40 percent of premium dollars for administration, marketing, and profit."
    I note that the 40% includes more than just profit ...

    Based on our govt's track record for "administrative costs" on anything they do, I'd expect that we won't be saving a whole lot on that part of the equation.

    For example, if we include executive compensation of insurance company executives in administrative costs, should we not also include the compensation for the "health czar" (whoever that may turn out to be) as part of administrative costs for the govt?

    Can we assess a cost for the time that hundreds (if not thousands) of individuals (Congresspeople & their staffs) have already consumed coming up with the hodge-podge bills they have so far proposed? The paper, alone, to print out thousands of pages of proposals should be a nice chunk of change.

    I'd also mention that it has always been the basis of "insurance" that the companies providing the coverage invest the excess funds collected in order to provide for future claims. That is the whole actuarial basis for determining how much premium is needed to be charged. When the costs escalate rapidly, then premiums will increase because the investments cannot keep up with unanticipated rapidity of increasing costs.

    I have little, or no, faith that our govt has been very good at predicting future costs of any given program. Historically, our govt representatives cannot stand to see surpluses accrue without spending them ... forgetting that those surpluses were part of the plan for future fiscal soundness of a program.
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  2. #12
    Member txbadger's Avatar
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    Here's another report which differ from Yardley's

    Page 14 Of MN Ratios:

    http://www.state.mn.us/mn/externalDo...atioReport.pdf

    Total 2008 Individual Premium 595M Claims: 457M 92% Claims ratio


    Page 16:


    Total Small employer Prem 1.542B Claims 1.337B 87% Claims Ratio

    As a former VP of a major insurance company all I can say is there are over 1800 insurance companies licensed to sell health insurance but only a few do. But over 1800 sell life insurance, need to buy a clue? Our federal employees have private insurance for a reason.....

  3. #13
    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by txbadger View Post
    Here's another report which differ from Yardley's

    Page 14 Of MN Ratios:

    http://www.state.mn.us/mn/externalDo...atioReport.pdf

    Total 2008 Individual Premium 595M Claims: 457M 92% Claims ratio


    Page 16:


    Total Small employer Prem 1.542B Claims 1.337B 87% Claims Ratio

    As a former VP of a major insurance company all I can say is there are over 1800 insurance companies licensed to sell health insurance but only a few do. But over 1800 sell life insurance, need to buy a clue? Our federal employees have private insurance for a reason.....
    If yu read the report you referenced, you will find that the high loss ratios in Minnesota reflect the fact that 70% of the individual policy market is controlled by a single non-profit provider that operates with a loss ratio of 92%. That effectively defines the competitive market for all other players. As I noted in my oroginal comments, one of the problems is interpreting insurance returns is that non-profits are still a major market force in many states and distort results when included with states where non-profits are not a significant force.

  4. #14
    Senior Member M&K's Retrievers's Avatar
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    Quote Originally Posted by YardleyLabs View Post
    If yu read the report you referenced, you will find that the high loss ratios in Minnesota reflect the fact that 70% of the individual policy market is controlled by a single non-profit provider that operates with a loss ratio of 92%. That effectively defines the competitive market for all other players. As I noted in my oroginal comments, one of the problems is interpreting insurance returns is that non-profits are still a major market force in many states and distort results when included with states where non-profits are not a significant force.
    I assumed you were a bean counter but I'm certain your not an actuary. If you are , you would not base your coments on such small samples and quote numbers you think prove your point.
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  5. #15
    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by M&K's Retrievers View Post
    I assumed you were a bean counter but I'm certain your not an actuary. If you are , you would not base your coments on such small samples and quote numbers you think prove your point.
    You can track down the reports from different states yourself. I have, through various Google searches, found retention rate/loss ratio analyses published by most of the major state insurance commissioners at various times over the last year, but not in any one effort. They all tell essentially the same story. The American Families survey of states included 19 states representing the majority of all policies in the country. It was not a sample, but a complete analysis of each of those states for the period 2007-2008. I am a former partner in Ernst & Young, but am not an accountant. I studied statistics at the graduate level but am not an actuary. I do recognize the difference between a sample and an accounting of all business in a state. I also recognize that the insurance industry is regulated by each state independently and that what is happening in one state does not reflect what is happening in an another. That is the reason for state "surveys" to identify specific conditions.

  6. #16
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    All the hand waving and rhetoric aside.....

    "Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries...."

    The health insurance biz doesn't seem to have the obscene profits that Nancy Pelosi (and others) claims. Is she just lying to us or is it that she hasn't done her homework? Perhaps she doesn't really know...but should. In either case, are we truly expected to roll over and accept a healthcare plan crafted by either liars or the uninformed?

    I'm happy with my healthcare. Leave it alone. There's no reason why I should pay more money for less healthcare.

    Eric

  7. #17
    Senior Member M&K's Retrievers's Avatar
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    Quote Originally Posted by YardleyLabs View Post
    You can track down the reports from different states yourself. I have, through various Google searches, found retention rate/loss ratio analyses published by most of the major state insurance commissioners at various times over the last year, but not in any one effort. They all tell essentially the same story. The American Families survey of states included 19 states representing the majority of all policies in the country. It was not a sample, but a complete analysis of each of those states for the period 2007-2008. I am a former partner in Ernst & Young, but am not an accountant. I studied statistics at the graduate level but am not an actuary. I do recognize the difference between a sample and an accounting of all business in a state. I also recognize that the insurance industry is regulated by each state independently and that what is happening in one state does not reflect what is happening in an another. That is the reason for state "surveys" to identify specific conditions.
    Yardley, you can cite all the worthless studies you want but the real world is that if insurance companies were making so much profit from writing fully insured comprehensive major medical insurance for employer groups and individuals, there would be more than a handfull still doing it. Have you ever risked your own funds to make a profit or just managed other people's money by giving folks advice obtained from your ouiji(sp) board? I suspect the state surveys are not as acurate as the companies PNL statements.
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  8. #18
    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by M&K's Retrievers View Post
    Yardley, you can cite all the worthless studies you want but the real world is that if insurance companies were making so much profit from writing fully insured comprehensive major medical insurance for employer groups and individuals, there would be more than a handfull still doing it. Have you ever risked your own funds to make a profit or just managed other people's money by giving folks advice obtained from your ouiji(sp) board? I suspect the state surveys are not as acurate as the companies PNL statements.
    If you know anything about the reports from state insurance commissioners, you would also know that they are based on the financial reports submitted as a matter of law by the insurance companies; they are based on 100% of the data and are not sample studies. While a 2-3% profit may sound low, that needs to be viewed in light of the risks assumed. A 17% average return on assets over a ten year period is not bad at all. And yes, I have owned and profitably run businesses with my own money at stake since 1984, employing hundreds of people in the process. I am currently semi-retired, having turned my last business over to my staff, and continue to support myself through my savings and money I earn through what used to be my hobbies.

  9. #19

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    So, is 17% obscene as some of your dems have stated?

    In my business I shoot for a 15% profit, I must be a capitalist pig on a mission to take advantage of the underprivileged.

  10. #20
    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by code3retrievers View Post
    So, is 17% obscene as some of your dems have stated?

    In my business I shoot for a 15% profit, I must be a capitalist pig on a mission to take advantage of the underprivileged.
    Did I say anything about obscene? If you follow my posts, you would notice that, from the beginning, I stated that insurance company profits were not a big part of the problem with the exception of certain abusive product lines (which do not include comprehensive group coverage). Profit margins vary by industry and industry structure and can only be judged in the context of that industry. By looking at return on assets, you get some leveling of the playing field and can judge the return based on relative risk. In health insurance, the risk is generally considered to be very low.

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