You have heard it all … outrageous profits for health insurance companies, price gouging and rising premiums. We all know that profits drive our premiums higher, right?
Not so much.
By comparison, Starbucks in 2017 had a net profit margin of %
Despite all the rhetoric, profits are not the driver of growing premiums. The growth in aggregate profits of a health insurance company is primarily the result of a growth in the number of people it insures, not a higher profit on each policy.
The significant driver of higher health insurance premiums is the cost of health care and how much health care we use.