Private Insurance

In 1973, the federal government enacted the Health Maintenance Organization Act. This provided for the establishment of HMO's which was the beginning of "managed care". These managed care companies have grown in size to the extent that they now have a virtual monopoly in most of the healthcare markets in the US (279 of 296 regions in 2004). A 2004 study indicates that in greater than 50% of the markets, one company had more than a 50% market share. In 20% of the markets, one company controlled at least 70% of the market. The federal government has chosen to do nothing about this. As a result, the insurers have been able to increase premiums without concomitantly increasing the reimbursements to hospitals and physicians, thereby increasing profits. As more consolidation occurs, less competition will result and premiums will likely continue to increase at rates higher than the cost of living and higher than the actual costs of healthcare.

Things to consider:

The six largest insurers in the US collectively earned about $9.3 billion in profit after expenses in 2005. According to AMEDNEWS , first quarter 2007 profits compared to first quarter 2006 for United Health increased 6%, Wellpoint increased 16%,and Aetna increased 7%.
They spent, on average, 80% of the premium dollar on actual healthcare related expenses and retained 20% for overhead and profit.
Medicare has overhead of about 1.8%.
The 20% overhead for private insurers translates to about $132 billion per year. If they had the same percent overhead as Medicare, there would be a savings of about $120 billion annually.
In 2003, the Oxford Health Plans CEO received $76 million in compensation.
A 2003 study demonstrated that nine of the largest private insurers had between 14 and 35 employees per 10,000 enrollees, compared to Canada (with a single payer system) where the number was 1.3.
The increases in premiums from 1998 to 2004 for private insurers exceeded the "net" increases in healthcare costs by about one-third, and the cost of living by about four times.
Not-for-profit insurers have the same earnings profile as for-profit insurers, but they call the "profits" reserves.
From 2001 to 2005, the average employee monthly contribution to employer sponsored health insurance has increased from $30 to $51 despite higher deductibles and co-payments, and decreased coverage.
Out-of-pocket costs have increased between 5 and 7% per year.
Using federal government estimated numbers for 2007 expenditures, private insurance premiums will be about $800 billion. The excess overhead expense compared to Medicare will be about $148 billion or $988 per person purchasing private insurance.