Earlier quoted context omitted.
Why is gross margin relevant? >Their profit (~5% as you mentioned) comes after they pay their relatively consistent operating expenses out of their gross margins. Just like in any other business. >The increased number of people getting insured is not what has driven up the insurance companies profits. Those numbers don’t add up. Their profit margin has not been driven up [0]. >It’s not competitive at all, imho. It’s…
Do you have any direct experience with the medical industry? If not, do you know anyone who has? It really seems like you are arm-chair quarterbacking your comments based on some quick online searches. I strongly encourage you to talk to folks who have worked in hospital billing pre- and post-ACA and (if possible) actuaries who work in the health insurance industry who will speak to you frankly (rather than toeing th…
Do you expect profit margins to approach 0% over time?
> If you can increase gross margin number while maintaining operation costs at about the same proportional level, then you end up with more absolute profit. So 100 premium, 20 gm and 5 profit can become 150 premium, 30 gm, and 7.5 profit.
Sure, but because of competition, this is not happening. The premium payer will shop around and choose a different insurer offering 130 premium. If this is happening, there would be clear evidence, since all of these publicly listed companies have public financials.
> is an example of hospitals feeding at the trough.
This discussion is about insurance companies, not hospitals.
In any case, I will simply rest my case that a business with low single digit profit margins is, by definition, not “feeding at the trough”. Lots of competition, low profit margins, all lead to a pretty cutthroat business environment.
I suggest people direct their ire at drug manufacturers, healthcare providers, software providers, and others in the healthcare business with 20%+ profit margins. And increasing the supply of healthcare in general.
Or people can keep wasting energy on blaming the 3% middleman, which is beneficial for the 20%+ profit margin businesses.
Edit: final note:
> - My premiums pre-ACA to now have almost quintupled. There are some good reasons to explain a small part of that increase (e.g., I’m older), but 4-5x is absurd. Way higher than inflation, and way higher than the quality of care has improved (for me specially, but also in general).
Premiums pre ACA and post ACA cannot be compared due to drastic changes in laws about the terms is the insurance. Namely, the limitation of pricing insurance on only age/location/smoking status, and the implementation of out of pocket maximums. In addition, as of 2022, the no surprises act bill means out of network emergency costs are included in the out of pocket maximums.
Effectively, even though you feel you are getting less quality of care (and you very well might be), the insurance product is much different than before with much higher (nominal) coverage, much more expensive treatment options, and more subsidies for others in the insurance pool.
Based on aging demographics and declining labor force participation rates, I would not expect the situation to get any better. Healthcare, especially labor intensive, will cost more and more.