Fact Check: Putting Health Plan Profits In Perspective

Posted by The Campaign on February 12, 2010 at 12:10 PM

Facts about health plan profits:

• Analyzing 9 of the 14 health plan companies on the Fortune 500 list from 2009 (these 9 have filed their initial year-end financial statements with the SEC) the profit margin for these 9 companies averages 3.9 percent for 2009 -- for 2008 it was 3.1 percent for these same 9 companies.

• Five of the nine companies actually saw a decline in their profit margin – averaging a decline of 47.2% 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% (4^th)
  • 2008 - 3.2% (5^th)
  • 2007 - 5.6% (2^nd)
  • 2006 - 5.4% (3^rd)
  • 2005 - 6.4% (1^st)

• According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11.1%.  Using the same index, health plans have a 3.4% net profit margin – 226% less than the entire health care sector.

What Others Say About Health Plan Profits

• Ezra Klein: “...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.”

• Henry Aaron, Brookings Institution: “Insurance company profits in the large picture have very little to do with the overall rising cost of health care.”

• Dr. Peter Kongstvedt: “The insurance companies are not the major drivers of cost inflation…”

• 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.”

*Source: Analysis of SEC Data

Tags: Fact Check, profits