FACT CHECK: Health Plans’ Profits Accounted for > 1/2 of 1% of Total Health Care Spending in 2010

Health plans are an efficient, low margin industry.

The total profits of the 2010 top 10 health care plans (as determined by market cap) accounted for .4974% of total national health expenditures. (See the below chart for 2000–2010)

The latest Yahoo! Finance quarterly corporate financial data shows the following:

  • The health care plan industry’s average profit margin is 4.40%. This ranks the health care plan industry 143 out of 215 different industries.
  • Within the health care sector, the health care plan industry ranks 12th out of 16. (See the below chart.)

Experts agree that health plan profits are not the cause of higher 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.” (Louisville Courier-Journal, Health Insurers Defend Profits, 02/21/10)

Henry Aaron, Senior Fellow, Brookings Institution:

“‘Insurance company profits in the large picture have very little to do with the overall rising cost of health care,’ said health care expert Henry Aaron, a senior fellow at the Brookings Institution.” (ABC News, Health Insurance Profits: Not So Outrageous After All?, 11/10/09)

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.” (Kaiser Health News, Ad Audit: What If?, 06/19/09)

Ezra Klein, The Washington Post:

“…it’s hard to see how [health plan profit margins of 3.3%] are a primary driver of health-care spending, much less the growth in health-care spending.” (The Washington Post, Ezra Klein, Profits and the Insurance Industry, 09/10/09)

Health plans agree that the nation needs to get health care spending under control, but the focus needs to shift to the areas that are really driving health care spending higher.

Health plans are doing their part to improve the quality and safety of patient care and help put our health care system on a sustainable path.

In the face of these exploding costs, health plans are deploying the next generation of medical management tools to promote a high-value health care system, including:

  • Targeting disease management services to enrollees who stand to benefit the most from pro-active interventions;
  • Working with primary care physicians to expand patient-centered medical homes that promote care coordination and accountability for clinical outcomes;
  • Providing incentives to promote the use of decision-support tools and health information technology;
  • Providing quality improvement reports for physicians to monitor their progress in managing disease;
  • Offering personalized risk assessments and wellness programs;
  • Encouraging electronic prescribing and consumer safety alerts;
  • Providing peer-to-peer comparisons to demonstrate the appropriate use of health care services across specialists and manage the use of high-cost imaging services.

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