> for all of that, you earn a 2% to 3% profit margin.
Yeah -- it seems like a paradox that the insurance companies charge so many people so much money, yet struggle to make a profit.
I've heard that they spend a lot of money handling their "internal friction" -- reviewing claims, handling appeals, etc.
Health insurance premium revenue = medical loss ratio + operating costs + profit margin
Medical loss ratio is the money paid to healthcare providers. Operating costs end up being ~10%, across multiple publicly listed companies. This fact, plus 2% to 3% profit margins means any more cost reductions have to come from legislation, reduction in healthcare prices, or advances in automation.
https://www.oliverwyman.com/our-expertise/insights/2023/mar/...
https://www.kff.org/private-insurance/medical-loss-ratio-reb...