Debating the Impact of Health Plan Profits

News Type: 

News Article

May 19, 2011

Issue Areas: 

Cost, Delivery System Reforms, Insurance

On May 14, America’s Health Insurance Plans (AHIP) released a report indicating that their industry has an average profit margin of only 4.4% and is not a primary driver of rising  health costs.  Health Care for America NOW (HCAN), a national grassroots organization, strongly disagreed.

Both HCAN and AHIP based their analyses on data from Yahoo! Finance looking at the entire 16 sector health care industry. HCAN cites the daily Return On Equity (ROE) for health care plans on May 18, 2011, which was 16.10%, as proof of excessive profits earned by health insurers. In an email to reporters, HCAN, Director Ethan Rome was quoted saying that AHIP’s stats are “misleading and designed to protect their massive income by shifting attention away from their return on equity– a key measure of profits as a percentage of the amount invested. That return is a phenomenal 16.1 percent as of today. By that measure, health insurers are ranked fourth highest of the 16 industries in the health care sector.”

AHIP used the Profit Margins by Sector for the current quarter, as of May 12, 2011, to show that their profit was only 4.4%, or the 5th lowest profit margin in the industry. AHIP also  points to many other factors that are driving up health care costs, such as $305.9 billion in the practice of defensive medicine and the misuse of services.

In response to HCAN’s analysis, AHIP Spokesman Robert Zirkelbach said, “Shocking: [HCAN] released yet another deceptive, ideologically based attack on health plan profits. The data continue to show that this is an efficient, low-margin industry. It’s time for them to get over the fact that the American people rejected the government-run plan and to start focusing on what’s really driving health care cost growth.”