Are Profits Driving Up Healthcare Prices?

Blog Post - Are Profits Driving Up Healthcare Prices?

THE LEFTIST'S CLAIM: "Health insurance companies make obscene amounts of money!"

THE REALITY: Health insurance companies actually earn less on the dollar than many of the companies held in high esteem by leftists.

The website Samuel-Warde.com, which calls for "liberals to unite" and considers itself a "news magazine for discerning liberals," sought to identify companies it claimed liberals should support. [a] Levi Strauss, Costco, Starbucks, Sonic, Microsoft, Calvin Klein, and Trader Joe's, made the cut. [a] The reasons ranged from "long time supporters of gay rights," "positive depictions of the LGBT community," donating heavily to Liberal causes / candidates, affordable health care benefits, support for unions, environmental friendliness, being against animal cruelty / testing, and selling cage-free eggs as opposed to traditional eggs. [a] These companies will act as our example of what liberals hold in high esteem.

Next, we must examine their financials. When doing so, it's important to understand the difference between "profit" and "net income." A firm may spend 10 million dollars acquiring unfinished goods and use that to sell 20 million dollars worth of finished products, leaving them with "wild profits" of 10 million. But if the ENTIRE business required an additional 9.9 million in expenses (such as salaries, rent for offices, utilities, legal/compliance fees, taxes, etc), their net income would actually only be $100,000. That is why "net income" is the accurate number to look at rather than just "profit." [b]

So let's take a look at the ratio of net income to total revenue. For instance, in 2015, Levi Strauss' total revenue was $4,500,000,000 but their net income was $209,000,000. That means they only earned 4.6 cents on the dollar. [c] Costco earns 2 cents on the dollar. [d] Starbucks earns 14.3 cents on the dollar. [e] Sonic, 10.6 cents on the dollar. [f] Microsoft, 13 cents. [g] Calvin Klein, 7.1 cents. [h] And Trader Joe’s earns 6.1 cents on the dollar. [i] That's a range of 2 - 14.3 cents and an average of 8.24 cents on the dollar. Remember this range and this average because THIS is apparently what leftists are very comfortable describing as ethical.

Now let's shift over to insurance companies, whose earnings are routinely painted as "unethical." Based on who's the "biggest, safest, and most reliable" provider in the U.S., as named in Health Insurance Zoom's 2016 ratings [j], Anthem earns 3.2 cents on the dollar [k], United Healthcare earns 3.7 cents [L], Aetna earns 3.9 [m], Cigna - 5.5 [n], Kaiser Permanente - 5.4 [o], Humana - 2.3 [p], HCSC - 4.8 [q], and Highmark earns 2.5 cents on the dollar [r]. That's a range of 2.3 - 5.5 cents and an average of only 3.91 cents on the dollar; FAR less than leftist rhetoric might imply.

Conclusion: While firms favored by leftists escape the ire and condemnation cast onto health insurance companies, it turns out, health insurance companies actually earn less on the dollar. Perhaps their earnings aren't as "obscene" as people presume.

Sources:
• Levi Strauss: (2015)
Revenue: $4,500,000,000
Net Income: $209,000,000
$0.046 on the dollar
• Costco: (2015)
Total Revenue: $116,199,000,000
Net Income: $2,377,000,000
$0.020 on the dollar
• Starbucks (2015)
Revenue: $19,162,700,000
Net Income: $2,757,400,000
$0.143 on the dollar
• Sonic (2015)
Revenue: $606,090,000
Net Income: $64,480,000
$0.106 on the dollar
• Microsoft (2015)
Total Revenue: $93,580,000,000
Net Income: $12,193,000,000
$0.13 on the dollar
• Calvin Klein (Parent company = PVH) (2015)
Total Revenue: $8,020,300,000
Net Income: $572,400,000
$0.071 on the dollar
• Trader Joe’s (2014)
Total Revenue: $9,380,000,000
Net Income: $578,000,000
$0.061 on the dollar
• Anthem (2015 figures)
Revenue: $79,239,900,000
Net Income: $2,560,000,000
$0.032 on the dollar
• United Healthcare (2015 figures)
Revenue: $157,107,000,000
Net Income: $5,813,000,000
$0.037 on the dollar.
• Aetna (2015 figures)
Revenue: $60,336,500,000
Net Income: $2,390,200,000
$0.039 on the dollar.
• Cigna (2015 figures)
Revenue: $37,988,000,000
Net Income: $2,094,000,000
$0.055 on the dollar
• Kaiser Permanente (2014 figures)
Revenue: $56,400,000,000
Net Income: $3,100,000,000
$0.054 on the dollar
• Humana (2015 figures)
Revenue: $54,289,000,000
Net Income: $1,276,000,000
$0.023 on the dollar
• HCSC (2012 figures)
Revenue: $20,714,282,000
Net Income: $1,007,066,000
$0.048 on the dollar
• Highmark
Revenue: $8,670,000,000
Net Income: $221,000,000
$0.025 on the dollar

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