As I said elsewhere, insurers are legally required to spend no more than 20% on overhead. Profit margins run about 3% on a good year. The other 80% is required to be spent on actual medical care; doctors, hospitals, pharmaceuticals. If in a given year it turns out that the overall medical costs for an insurer were less than 80% of their premium charges, the insurers are required to refund the excess to the members who paid them. This is a regulation which is stringently enforced. If you’ve ever looked inside the insurer industry, it’s not a wealthy business. CEOs can make a bundle, though not by corporate giant standards, but in general salaries are low, and so are perks. Ironically, employees of insurers don’t get the most generous insurance plans. Those go to giant clients and unions. If you want to see a business with big overhead and big profits, that’s the pharmaceutical business. But in contrast to the relatively stable insurance business, pharmaceuticals are a very risky business, and people wouldn’t invest in it if they got the same return as the low risk 3% of insurers; so pharmaceuticals typically run a 20-25% profit margin. That’s profit, not overhead. As always, higher risk, higher return.
