Saturday, November 7, 2009

Questions of the Moment

Do health insurance companies make to much money? If they do, how much is to much?

Basis for the questions ... There were two themes that had struck me. The first was the idea that health insurance is all about making money and not about providing coverage. Apparently one aspect of the bill now in the house is a stipulation that limit overhead (which I assume would include salaries and profit) to 15% of premiums. The second was that the health insurance industry is currently generating a 2.2% profit margin. When compared other industries -- Big Oil at 8%, railroads at 12%; telecom / networking gear at 24% -- their profits are relatively small.

Break for reality ... Insurance companies do not make that much money. For the 2.2% there is a massive amount of cost associated with processing claims, negotiating with providers, and managing risk. The demagogues in Congress, on left wing talk radio, and in the progressive movement need a target to blame and insurance companies are it. What needs to happen with insurance companies is that they be allowed to focus on offering insurance and be permitted to move out of the payment processing business.


Why hasn't President Obama done anything to reduce gas prices and clamp down on Big Oil profits? How am I supposed to fill my SUV when the price keeps going up and up and up?

Basis for the questions ... I was listening to a talk radio show (no idea who it was) and they had raised this point. Looking back to the campaign, there had been much discussion on how much oil cost and the question was why wasn't W doing anything about it? For the folks on the left, one answer was because W and Cheney were in the pocket of big oil and had vested interests in Haliburton. This also provided another reason for the invasion of Iraq because we needed the oil and W and Cheney needed the profits that came with it.

Break for reality... President Obama has just as much say on the cost of oil as W did, which is to say "Not Much". Certainly if Obama were to make drastic changes in the American economy the boosted worldwide demand, discontinued all US Oil production, or attacked Saudi Arabia then we would see a price increase. But short of eliminating all oil consumption in the US (or other major countries) he is just as stuck to the whims of commidity traders and the international market as W was.