Are Insurers' Profits As Low As They Claim?

NPR looks into that with a written post and audio that is worth both a read and a listen...America's Health Insurance Plans (AHIP)claims only one penny out of every dollar goes to profit. The truth, is just a bit different:

Insurers are measuring their profits against total health care spending. That's all the money you and I and employers and insurers and the government spend for doctors' visits, hospitalizations, drugs and other things.

By using the total health care costs, their profits look lower.

But many economists calculate insurance company profits differently. Just like for any other business, they look at what the companies take in — in this case in premiums — versus what they pay out directly, as in claims.

Fortune magazine economists calculate insurance company profits this way:

For the 10 biggest insurers in the year 2006 (the year the insurers used for the 1 cent out of every dollar depiction above), profits were anywhere from 2 to 10 percent, or two to 10 pennies on the dollar. That's two to 10 times as much as what the insurance industry group suggests in its illustrations.