HealtchCare Round II, Anybody Interested?

[skeptic]

Okay; we just got a reason to pass the bill. Rush Limbaugh is promising to leave the country should it be passed. Says he will move to Puerto Rico, which I understand already has National Health Insurance.

 

How many will miss him, should he actually do it?

[Beavah]

Yah, I reckon somebody should tell Rush that Puerto Rico is still in da U.S., eh?

[Hal_Crawford]

Someone should tell Rush they speak Spanish there.

 

Hal

[BrentAllen]

If he wasn't able to broadcast to the continental US from Costa Rica (not Puerto Rico), I would certainly miss him. He only has the most popular radio talk show in the country. He is a great American success story.

 

Update - he says he would go there for medical treatment, not move there.(This message has been edited by BrentAllen)

[JoeBob]

Evil, evil insurance company profits:

 

****

According to the most recent Fortune 500 rankings, health insurers are not even among the top-30 United States industries in profit-margin. Health insurers rank 35th, with a profit-margin of just 2.2 percent -- less than one-fifth the profit-margin of railroads. None of the ten largest American health insurers made profits of more than 4.5 percent, and two of them lost money. Health insurers' collective profit-margin is less than one-eighth that of drug companies and less than one-seventh that of companies that sell medical products or equipment. It's also less than that of medical facilities. Yet when was the last time you heard President Obama rail against greedy hospitals?

 

The combined profits of America's ten largest health insurers are $8.3 billion. That's less than two-thirds of the profits of Wal-Mart alone, less than half of the profits of General Electric alone, and less than one-seventh of what Medicare loses each year to fraud. Health insurers collectively have one-eighth the profit-margin of McDonald's or Coke, one-ninth that of eBay, and one-fifteenth that of Merck.

 

In all, the combined profits of the 14 largest American health insurers (the ones who crack the Fortune 1000) are $8.7 billion. That's less than 0.4 percent, or 1/250th, of overall U.S. health-care costs, which are $2.5 trillion.

****

 

Those Bast**ds!

[DancesWithSpreadsheets]

Excuse me JoeBob, but that reads like a press release from an insurance industry PR firm.

 

Profit margin can be a misleading statistic, especially when making comparisons across different industries. Insurance is an unusual sort of business, not very capital intensive, just money in and money out. No inventory, no factories, not a lot of real estate or even equipment (computers are pretty cheap these days).

 

If I was considering investing in an insurer I'd be more interested in return on assets or return on equity.

 

Just for fun I looked up some information on the largest for profit health insurer I could think of, Aetna. Here's what I found in a supplement to their latest earnings release (from http://www.aetna.com/news/newsReleases/contentMgtAssets/documents/pr_4thquarter2009_earnings.pdf)

 

(all amounts in millions)

Total Revenue...

Total Revenue 34,678.90

Net Income 1,276.50

Net Margin 3.7%

 

Total Assets 38,550.40

 

Total Equity 9,803.80

 

By my calculations that means that Return on Assets as 3% and Return on Equity was 13%.

 

13% return on investment, and thats after interest and taxes is not too shabby. Sorry, if those results are typical, I don't feel too sorry for them.

 

Regards,

DWS

 

[JoeBob]

Hmmmmm.

DancesWithSpreadsheets speak with accountant's tongue.

Truth in naming is a good thing.

 

So if I had invested $1,000 in Aetna, what would my investment be worth after one year?

 

Thanks

JoeBob

[OldGreyEagle]

Lord help me, but in this topic, I am on JoeBob's side, on this one topic so far

 

When did success become a dirty awful and terrible thing?

 

Why is not Donald Trump reviled and shunned for having money?

 

When did we as a society decide that we would tell others how much money they could make?

 

I mean, if the Chicago Bears can promise ( more or less) 90 Million to Julius Peppers, what difference does it make how much money a person or company makes?

 

We want goverment to regulate how much money Insurance Campanies can make? When did Goverment involvement into something they know nothing about (see Amtrak) go smoothly?

 

One could make a case the reason why health care costs as much as it does is because of the amount of current government involvement as there is now.

[Lisabob]

OGE I think the difference lies in how a company or individual makes its money. Although I think most athletes, actors, and music stars and the like are over-paid, I also recognize that they are unusual or even unique in their talents, and that they are actually making positive, creative, contributions. And in the case of athletes, many put themselves in harm's way every time they perform and their careers are limited. A guy gets hit the wrong way and suffers a career-ending injury, etc. So I don't generally begrudge them their money, even though I think we as a society over-value them (monetarily speaking).

 

But health insurance isn't like that. I think it is more akin to what we've seen with credit card and banking industries. Many people perceive the credit card industry to have run amok, tricking and abusing folks with practices like double cycle billing, universal default, moving payment due dates and due dates on Sundays when there is no mail delivery, charging fees for everything imaginable (including speaking to a "customer service" rep in some cases), etc. THe outrage became so bad that Congress - which has never really been too inclined to legislate credit cards if it could be avoided - did exactly that and passed a bunch of new restrictions on the industry.

 

A lot of folks feel similarly about the insurance industry. People who pay their premiums for years and get dumped when they finally have a medical problem, companies who practice the "three d's" (delay, deny, defend) rather than just providing the services that they contracted for with customers, crazy restrictions on what can and can't be paid or covered, etc., plus sky rocketing rates for an industry which certainly appears to be financially very healthy to the average observer, all get people mad. It is one thing to make a profit and to succeed. It is another to do it through usury or trickery or slimy practices. And that's the impression an awful lot of folks have. No wonder they get riled up.

 

Whether the impression is accurate? Dunno. There is certainly a lot of anecdotal evidence.

 

[DancesWithSpreadsheets]

That I can't tell you JoeBob, I'm an accountant, not a psychic, or even an investment advisor.

 

I can tell you that one year ago a share of AET was trading at less than $23.50 a share. Today it's about $31. That's about a 32% increase. Like I said, not too shabby for a company with such a narrow profit margin.

 

Regards,

DWS

[BrentAllen]

Well, Dances, a year ago the Dow was at 6763. Today it is at 10584. That is a 56% growth in value. At 32%, Aetna is underperforming the market.

[DancesWithSpreadsheets]

Mr. Allen, you are correct, and provide an apt illustration of why I am not an investment advisor.

 

But the point I was trying to make is that profit margin is not a very good indicator of the success or falure of a business or an industry, and that in at least the one case I cited a company with a low profit margin can still have good returns for its shareholders.

 

Is the fact that a company (or an industry) underperforming the market (especially today's particularly volatile equity market)reason enough to conclude that healthcare reform is unnecessary at this time?

 

Regards,

DWS

 

[Beavah]

DancesWithSpreadsheets speak with accountant's tongue.

Truth in naming is a good thing.

 

Yah, when someone with expertise contradicts your belief, it's always best to dismiss their expertise and hold on to your belief, eh?

 

A return on equity of 13% is quite respectable. Bet you'd like to have that kind of return on your equity!

 

It's not appropriate to compare profit margins between manufacturing and financial services sectors.

 

Stock price depends on whatever the buyer is feelin' like paying, and often has nothing to do with the health of the company. More to do with how much fear, greed, or loose change is kickin' around.

 

With any information, look to da source. If it comes from a political interest or lobby, ignore it. It's useless crap. Those are advertisin' folks writin' stories and spinnin' yarns to try to sell yeh stuff... and like as not what they're sellin' is snake oil. No matter how much yeh might want to believe, or how much yeh share their politics, yeh have to dismiss that stuff or you'll end up lookin' the fool.

 

On my honor I will keep myself Mentally Awake and all that, eh?

 

OGE, I don't think there's anything wrong with bein' successful, eh? Just depends on how you define success. If I successfully provide a real service to the folks I work for, somethin' that improves their lives, or helps 'em when they're down, or gives 'em greater security, that's a good thing. Accepting a small fraction of their wealth for that service is reasonable.

 

If, on the other hand, I become wealthy by taking advantage of them, by only providing a limited service at a high price through manipulation, by takin' advantage of laws and loopholes, or by hurtin' society in general, then not so much.

 

Makin' money strictly by financial manipulation is one of those areas which is highly suspect for the latter. I reckon there was a reason why your religious tradition prohibited lending money at interest for most of its history, eh?

 

Beavah

(This message has been edited by Beavah)

[JoeBob]

Beavah said: "Makin' money strictly by financial manipulation is one of those areas which is highly suspect for the latter."

 

I am with you on that one! I understand investing in a company, but the options market seems like nothing so much as Las Vegas. Don't get me started on derivatives...

 

JoeBob

[OldGreyEagle]

I think I understand what you are saying Beavah, well, as much as I can understand you, but if today's Insurnace Company's are not providing services people want, why not have the people start up their own insurance companies, you know, like we keep telling people if you dont like the way things are, start your own youth program?

 

Why not have new Insurance Companies provide what people want? Is government intrusion the best way to handle this?