Greedy Health Insurance Companies

Since the beginning of the healthcare debate, we have been hearing a lot about the insatiable greed of American health insurance companies. The Obama White House has gone to great lengths to convince the American public that the profits of this industry need to be brought into check, and that the best way to accomplish this is to create a government competitor to drive down premiums.

I have already detailed my thoughts on the healthcare debate in a previous entry and will not repeat myself. However, recent developments in the health reform process have motivated me to further address this specific issue.

Obama has asserted on several occasions that health insurers are generating “record profits” under the current system. Harry Reid, the Senate Majority Leader, has stated that “there is no business in America that makes more money than the insurance industry.” However, while the insurance industry as a whole might be quite profitable, it is problematic to make these statements in relation to health insurers.

In response to these accusations, the Associated Press conducted a recent fact check on the health insurance industry and summarized their findings as follows:

Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

For anyone who has ever worked with health insurance claims, this is not surprising. While it is true that insurance companies charge sizable premiums, they also have substantial expenses. Contrast this with the pharmaceutical industry, which spends nearly five billion dollars in advertising each year and still has a median profit margin of 17 percent (larger company such Pfizer often earn well-above 20 percent). Hence if one is looking to cut “fat” from the system in order to make healthcare more affordable, the insurance sector should not be the focal point of their efforts.

So why are Obama and his friends going to such great lengths to beat up health insurers, while protecting big pharmaceuticals companies from having to compete with generic drugs?

Because discrediting private health insurance and establishing the “public option” is the easiest way to put the country on the path to single-payer government healthcare. In the future, the pharmaceutical industry and other sectors will inevitably come under fire; however, at present, the principal objective of left-wing Democrats is to forge an opening for a new government insurance provider. This is my personal interpretation of the situation, but I believe the political realities of the past decade evidence the merits of my reasoning.

Meaningful health reform must aim to foster competition and reduce costs throughout the system—not just insurance premiums. Regardless of which system is best for the United States in the long term, it will be a grave disservice to struggling Americans if the overall effectiveness of this healthcare bill is compromised by the impatient desire of key Democrats to push the U.S. towards single-payer healthcare.