As the Democrats healthcare bill, designed to turn health insurance on it head, is percolating in Congress, I decided to look into the situation. The government has savaged the health insurance industry as if they were just a bunch of looters, taking all the money and leaving their customers high and dry. Much of what the Democrats are working on is designed to put the squeeze on the insurers. But they are looking at the wrong thing!
As a CPA, I like to look at the numbers. I have been reviewing the financial results of Wellpoint, the largest insurer with 35 million members and 42,000 employees. They are the Blue Cross franchisee in a number of states. If the health insurance industry is getting rich, it should show up here. Their financial statements are available on their website for anybody to see.
The 2009 results aren’t available yet but 2006 to 2008 are there. So did I find vast bundles of profits? If I had, I would be buying their stock instead of writing this. In fact, I was not moved at all towards that. Annual reports are designed for potential investors so put an optimistic a face as possible on things.
I would not buy into this industry. Their profits as a percentage of revenues are nothing special and Nancy Pelosi is trying to grab that.
It is clear that where the money is going is to the healthCARE industry, not the health INSURANCE industry. Of Wellpoint’s 2008 gross revenues of $57 billion, $48 billion went straight through to healthcare providers: hospitals and doctors. By the time they paid their administrative costs (salaries for 42,000 employees), taxes and drug bills, they were down to $2.5 billion which is only about 4.4% of the gross. With Nancy Pelosi hell bent on grabbing as much of that as possible, nothing good can come of this.
If the government is to reduce healthcare costs, they need to go where they are actually occurring, not after the industry doing the paying. They can beat up the health insurers forever and it will never touch health care costs. When you have the wrong people analyzing the wrong thing, they will get the wrong answer.
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