Friday, 6 January 2012
Health Care Profits Soaring
According to the numbers, health insurance companies have been reaping record profits ever since President Obama’s health care reform act was announced. This comes after private insurers complained the new legislation would drive them out of business. However, it’s hard to see how companies would suffer if more people are purchasing their products.
A recent Bloomberg Government report said more private insurers are now involved in the managing of public health insurance programs and the five biggest publicly-traded companies made more money in the first three quarters of 2011 than any other three-quarter period in the past 10 years. According to the report, the average company’s operating margin rose to 8.65 per cent last year compared to 6.9 per cent during the 18 months before Obama’s reform legislation was passed.
Even though insurers argued it would be costly for them to follow the new laws, such as insuring children who have pre-existing conditions, profits are rising. According to an article by the National Journal, a lot of the profits are the result of investing in public programs such as Medicaid and Medicare.
The insurers are offering customers of these programs managed-care plans and it was reported that more than 40 per cent of their revenue now comes from this. Combined, the top four insurers saw their Medicaid revenue double in 2011 to $4.11 billion from 2 billion. But in the 18 months since the health law was passed the growth on their commercial revenue was just three per cent.
The recent moves by some of America’s top private insurers leads one to believe that they feel the new health care laws will be implemented fully in the near future even though they are being challenged in the courts. The insurers feel more and more Americans will be leaning toward purchasing managed-care health programs. Some insurance analysts say private companies are making a lot of money by moving in on the public health programs, but this outsourcing isn’t going to save the tax payers money.
For instance the Congressional Budget Office figures show that Medicare Advantage plans cost the tax payers 10 per cent more than the traditional Medicare plan.
