How European countries regulate private insurance

[bornskeptic]

16. Health Insurance Company profits run around 4%.

The health-care sector is absurdly profitable. According to this data at Yahoo Finance, the sector-wide profit margin is 21.5 percent. But the insurance industry is one of its least-profitable parts: Its profit margin is at 4.54 percent. Hospitals are also a bit strapped, with an average margin of 3.5 percent.

So where's the money going? Drugs and medical technology, mainly. The major drug manufacturers have a 23 percent profit margin. The medical device makers are pulling in 12.6 percent. And this is all happening despite the fact that researchers are having a very difficult time showing that there's much benefit -- either in longevity or quality of life -- to all these new, and incredibly expensive, treatments. I don't want to call this spending waste, exactly. Some of the treatments do improve health, and the money on the table is a good incentive to innovate. But just squeezing insurers and hospitals won't control costs unless the insurers and hospitals can figure out some credible way to either squeeze drug and device makers or somehow ration their products.

http://voices.washingtonpost.com/ezra-klein/2011/02/health-insurance_industry_stil.html

Individual Insurance and Small Group insurance have total overhead of about 20%, but Large Group Insurance is much more efficient. Large Group plans tend to have MLRs around 85%, which is what is mandated by the ACA. Most of the overhead is payroll.