Do Insurance Industry Profits Cause High Insurance Premiums?

By Filed under Health Insurance on January 16, 2009 with 4 comments

A new study by PricewaterhouseCoopers finds that out of every premium dollar 87 cents goes for medical care. Of the remaining 13 cents, only three cents is insurer profits, four cents is marketing, and support services. The cost of compliance, claims processing, taxes and administration consumes the remaining six cents.

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  1. Dan Smith says:
    January 16, 2009 at 3:59 pm

    John, this rather puts the lie to the claims by universal health care advocates that they will pay for the increased cost by making the present system more efficient. How unsporting of you!

  2. Bart says:
    January 17, 2009 at 12:03 pm

    Other Administrative Costs (1%). Other administrative activities that support health plan operations are included in this component including premium collection, actuarial and underwriting services.

    This study appears to be mostly about employer-sponsored insurance. If individually-underwritten insurance were a major part, then administrative costs including underwriting would be considerably higher than one percent.

  3. Tom says:
    January 20, 2009 at 9:27 am

    This result seem to contradict the recent NBER study finding that the market for health insurance is not competitive.

  4. Kartik says:
    September 21, 2011 at 10:01 pm

    Brian needs to read this…. His story really didn’t make any sense.