OP here. I’m a retired engineer researching US healthcare pricing mechanics.
I analyzed the 10-K filings for the 'Big 3' insurers (United, CVS/Aetna, Cigna) to test the common claim that their profit margins are razor-thin (~3%) and therefore they aren't driving inflation.
The data shows a massive decoupling event in 2018. While margins remained flat (likely due to MLR regulations), total revenue quadrupled following the vertical integration of PBMs. Effectively, they shifted from a 'rate game' to a 'volume game.'
The chart in the post visualizes this split. I also discuss the 'Three-Legged Stool' solution (Residency Caps + MLR + AHPs) to address the structural incentives.
franktankbank•2mo ago
Anyone who refers to the profit percentage being low when talking about the gouging really is not arguing honestly. Agree? Its not the right number to look at, an easy distraction.
kmundy•2mo ago
Right! Sort of the reason the MLR cap ran into this issue in the first place.
The insurers are forced into the only remaining avenues to grow profits:
1. Grow the pie, by letting prices rise.
2. Acquire the entities benefitting from this price rise.
Which is exactly what they did, leading to this constant upward spiral of insurance premiums.
kmundy•2mo ago
I analyzed the 10-K filings for the 'Big 3' insurers (United, CVS/Aetna, Cigna) to test the common claim that their profit margins are razor-thin (~3%) and therefore they aren't driving inflation.
The data shows a massive decoupling event in 2018. While margins remained flat (likely due to MLR regulations), total revenue quadrupled following the vertical integration of PBMs. Effectively, they shifted from a 'rate game' to a 'volume game.'
The chart in the post visualizes this split. I also discuss the 'Three-Legged Stool' solution (Residency Caps + MLR + AHPs) to address the structural incentives.
franktankbank•2mo ago
kmundy•2mo ago
The insurers are forced into the only remaining avenues to grow profits: 1. Grow the pie, by letting prices rise. 2. Acquire the entities benefitting from this price rise.
Which is exactly what they did, leading to this constant upward spiral of insurance premiums.