Research from Citi shows that underwriting margin for non-for-profit Blue Cross Blue Shield plans fell to 2.8% in the third quarter, down 20 basis points from the second quarter. Citi expects margins to deteriorate further in the fourth quarter. Still, margins improved through nine months to 3.3%, compared to 3.1% for the same period a year earlier.
The question is what does this say about premium price competition? Citi notes:
There’s no question premium rate increases will be lower in 2012, in part driven by more aggressive Blue Cross pricing. That said, plans are still pricing above the current cost trend, so provided utilization remains low, margins at the publicly traded plans can still improve in 2012.
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By any perspective, this is a razor-thin profit. All those who think that health insurers are fat cats that have too much money should think again. My insurer is NOT a piggy bank to raid for your personal health care needs, and they need their profits far more than you do.
I want my insurer to be financially stable and be there when I need it. I want my insurer to be able to do all those things that allow it to provide the services I am paying premiums for. I don’t want anyone to use the law to help themselves to my health care premiums without paying a dime of their own money.
Those who dislike capitalism are looking for a free ride. All those who think profits have no reason to exist should try running their own business and keeping it healthy, while paying taxes and insurance premiums that are then gifted to politically favored people for their free health care.
Quit helping yourself to my insurer’s profits, and start paying your own way!
At around 3% (higher for the for-profits), health plans margins are indeed small — as I’ve noted before on this blog. The problem really is the administrative infrastructure in place to maintain those tiny margins. Administrative cost eat up about 10% of total premiums. And that doesn’t include the additional administrative cost among providers who need to deal with multiple insurers — all with their own rules and procedures. For this industry to survive, it needs to prove it’s delivering enough value to support this administrative burden.
You don’t specify what is in those administrative costs, so you are in absolutely no position to pontificate how a health insurer should be run. Go run your own health insurer and then see what kind of costs you need to deal with before you glibly blow off their administrative cost burden.
For this industry to survive, our government must get OUT of it and let it and all private businesses do what they do best. Government has no expertise whatsoever in competently directing how a business should be run. Government forces itself on businesses only when our political elite wants those businesses to do its bidding to promote their own power.
The free market is the right arbiter to determine if a business will do well, although our political elite has seen to it that there is no longer a free market for health insurance with its corrupt intrusion and interference.