Insurance company ripoffs

On July 22, President Obama said “you know, there had been reports just over the last couple of days of insurance companies making record profits. Right now, at the time when everybody’s getting hammered, they’re making record profits and premiums are going up.”

I pulled up some government statistics (National Health Expenditures) about health insurance. Hard working Americans paid $775 billion for premiums in 2007. The insurance companies paid out to our service providers $680 billion. That leaves them with $95 BILLION. No wonder he's attacking them. That means the insurance companies enjoy a 12.3% profit off of our premiums.

Oops. I must have done something wrong. Let me check my figures. Hmmm...still 12.3%. It's my understanding that they must pay administrative costs, state and federal fees, AND taxes from that 12.3%.

I don't understand. Why is he trying to tell us that the insurance companies are ripping us off? $95 billion sounds like a lot of money but a 12.3% profit before other expenses and taxes makes it sound more reasonable. Don't we want them to make a profit? Many of us are invested in insurance companies. If not directly, then we are invested through our retirement plans. Insurance companies are not the villains although Nancy Pelosi has called them that.

The reciprocal of the 12.3% is 87.7%. That is what is called the actuarial value or cost sharing. Under hb 3200, the basic plan requires a cost sharing of 70%; under the enhanced plan, 85%; under the premium plan, 95%. Seems to me the insurance companies already offer plans that pay out more than 85%.

HB 3200 will require the insurance companies to accept clients with pre-existing conditions and with a non-cancellation clause. If they don't raise premiums, what will those two things do to their 12.3% profit. They will also be required to cover at no cost to us any preventive medical procedures.

Do you really think they will stay in that business if they can't make a profit? Now you can answer the question that is frequently posed. "Can I keep my current policy?" Of course, you can; as long as the company stays in the business.