From Calvin Woodward at the Associated Press:
In the health care debate, Democrats and their allies have gone after insurance companies as rapacious profiteers making “immoral” and “obscene” returns while “the bodies pile up.”
But in pillorying insurers over profits, the critics are on shaky ground. Ledgers tell a different reality.
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.
Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.
Insurers are an expedient target for leaders who want a government-run plan in the marketplace. Such a public option would force private insurers to trim profits and restrain premiums to compete, the argument goes. This would “keep insurance companies honest,” says President Barack Obama.
Health insurers posted a 2.2 percent profit margin last year, placing them 35th of 53 industries on the Fortune 500 list. As is typical, other health sectors did much better – drugs and medical products and services were both in the top 10.
The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.