Health-Insurance Companies and Their Profit

Another bit of misleading rhetoric in the health-care “reform” debate is that the “evil” insurance companies have raked in obscene profits. Jeff Jacoby, in the Boston Globe, notes the following problems with that argument:

On the Fortune 500 list of top industries, health insurance companies ranked 35th in profitability in 2008; their overall profit margin was a mere 2.2 percent. They lagged far behind such industries as pharmaceuticals, which showed a profit margin of 19.3 percent, railroads (12.6 percent), and mining (11.5 percent). Among health insurers, the best performer last year was HealthSpring, which showed a profit of 5.4 percent. “That’s a less profitable margin,’’ AP noted, “than was achieved by the makers of Tupperware, Clorox bleach, and Molson and Coors beers.’’

For the most recent quarter of 2009, health-insurance plans earned profits of only 3.3 percent, ranking them 86th on the expanded Yahoo! Finance list of US industries. Makers of software applications, by contrast, are pulling in profits of nearly 22 percent. Strangely, however, MoveOn and the Democrats aren’t demanding a “public option’’ to compete with Oracle and Adobe to drive down their “immoral’’ profits.

The type of rhetoric that casts the health-insurance companies as the sole problem in our health-care system is used by politicians and interest groups to push forward their agenda. Instead of relying on sound arguments, they demonize certain segments of society in order to rally people to their cause.

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