Study reveals UnitedHealth's profit margins four times what it claimed [pdf]

> Conventional accounting measures portray large health insurers such as UnitedHealth Group (UHG) as earning relatively low profit margins because they treat premium dollars that are subsequently paid out in medical claims as revenue. However, these medical claims are pass-through costs, not income retained by the insurer.

I don't understand this claim. Doesn't every business have costs to make its goods and services, and revenue when those are sold? A grocery store sells food and uses the money to buy more food, pay its employees, reinvest etc, and the profit leftover goes to the owners. An insurance company sells policies and similarly uses the money to pay claims, pay employees, reinvest, and profit. Why is the insurance company's sales revenue pass-through and the grocery store's sales revenue not?

Update (30 minutes in): the replies so far all seem very superficial. Yes, I know that insurance is not exactly the same as grocery stores. This does not explain why they should suddenly be treated differently from an accounting perspective despite what everyone else before this moment has done.

typos mean its more likely to have been made by a human.

typos mean it's more likely to have been made by a careless human.

An intuitive explanation is that financial products are, approximately, buying and selling as part of the same transaction. You can't separate the "selling premiums" part from the "paying out claims" part.

This is true of life insurance, investment firms, and banks. It's also true of marketplaces that connect buyers and sellers, like Etsy.

Groceries stores are buying from suppliers and selling to consumers, but those are separate operations. If the consumers opt out, the grocery stores (temporarily) still have a full and complete obligation to their suppliers. It's hard to sell to customers without supply, but if you try hard, you could theoretically do that as well.

Somebody with a better financial background might be able to define the nuances of accounting practices here, but there's already a pretty meaningful line that's established. It is kind of weird that health insurance doesn't behave like a financial product.

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