FACT CHECK: Putting Health Plan Profits in Perspective
Posted by The Campaign on March 08, 2010 at 7:32 AM
Health plan profits continue to be a focus of the reform debate. Here are some important facts about health plan profits:
Analyzing 13 of the 14 health plan companies on the Fortune 500 list (these 13 have filed their initial year-end financial statements with the SEC) the profit margin for these 13 companies averages 3.19 percent for 2009 -- for 2008 it was 2.3 percent for these same 13 companies.
- Six of the 13 companies actually saw a decline in their profit margin - averaging a decline of 48.7% in profit margin from 2008 to 2009.
For the five largest health plans (determined by market cap), the average profit margin for 2009 is the second lowest from 2005-2009 - 2008 was the worst year.
- 2009 - 5.2% (4th)
- 2008 - 3.2% (5th)
- 2007 - 5.6% (2nd)
- 2006 - 5.4% (3rd)
- 2005 - 6.4% (1st)
According to Yahoo! Finance's analysis of the latest quarterly data, the net profit margin for the entire health care sector is 13.26%. Using the same index, health plans have a 4.3% net profit margin - 208% less than the entire health care sector.
According to Yahoo! Finance's analysis of the latest quarterly data, the net profit margin for drug makers was 21.3% compared to 4.3% for health plans - 395% less.
According to Fortune Magazine, the health insurance industry had a profit margin of 2.2% in 2008, ranking them 35th on the Fortune list of industry profits. This is below pharmaceuticals (#3, 19.3%), medical products and devices (#4, 16.3%), and medical facilities (#34, 2.4).
5 drug companies had profit margins of more than 20%
14 companies had profit margins of more than 10% -- which is more than double the health plan industry average
The average profit margin for health plans 3.19% vs. 18.67% for drug companies
The highest profit margin health plan company: 7.3% vs. 47.48% for a drug company.
One company had more profits than the entire health plan industry
The top two highest profit drug companies had almost double the entire profits for the health plan industry
Click here for a document putting health plan profits in perspective.
