Putting Health Plans’ Profits In Perspective

Health Plan Profits Average Between 3-5 percent

“Insurance company profits in the large picture have very little to do with the overall rising cost of health care.”

– Henry Aaron, Brookings Institution
(ABC News, 11/10/09)

Profits:

  • Analyzing the 14 health plan companies on the Fortune 500 list, the profit margin for these 14 companies averaged 3.58 percent for 2010 — for 2009 it was 3.18 percent for these same 14 companies.
  • Four of the 14 companies actually saw a decline in their profit margin – averaging a decline of 79% in profit margin from 2009 to 2010.
  • The top five insurers’ profits actually decreased 3.72 percent from 2009 to 2010 – from $12.2 billion to $11.7 billion.
  • For the five largest health plans (determined by market cap), the average profit margin for 2010 is the second lowest from 2005-2010 – 2008 was the worst year.

- 2010 – 4.9% (5th)
- 2009 – 5.2% (4th)
- 2008 – 3.2% (6th)
- 2007 – 5.6% (2nd)
- 2006 – 5.4% (3rd)
- 2005 – 6.4% (1st)

  • The total 2010 profits for the pharmaceutical companies on the Fortune 500 list were $44.7 billion down from $64.1billion in 2009.
  • The average profit margin for the pharmaceutical industry is 16.03%.
  • According to Yahoo! Finance’s analysis of the latest quarterly data, the net profit margin for the entire health care sector is 21.10%. Using the same index, health plans have a 4.4% net profit margin.
  • According to Yahoo! Finance’s analysis of the latest quarterly data, the net profit margin for drug makers was 23% compared to 4.4% for health plans.

What experts say about health insurance plan profits:

  • According to Kaiser Health News, “With the nation’s health care spending estimated at $2.5 trillion this year, even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.”
  • According to Ezra Klein of The Washington Post “The insurance industry is not a particularly profitable industry…That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending.”
  • Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12 billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’”

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