The Case for Non-Profit Health Insurance in the United States

Written by Joe Marzo

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In the United States, health insurance is mostly run by big for-profit companies. Switching to non-profit health insurance might save a lot of money and improve healthcare outcomes, as seen in several other countries. This article looks at the potential benefits of such a switch by examining examples from other nations, analyzing possible savings, and detailing the profits of America's largest health insurance companies.

Non-Profit Health Insurance Models in Other Nations

Several countries have non-profit models for health insurance, leading to more efficient and fair healthcare systems. Here are a few examples:

Germany: Health insurance in Germany comes from non-profit "sickness funds" (Krankenkassen). The government heavily regulates these funds to ensure they work for the benefit of their members. The administrative costs of these funds are much lower compared to for-profit insurers in the U.S., averaging around 5-6% of premiums.

Switzerland: Switzerland requires all residents to have health insurance provided by non-profit insurers. These insurers can't make a profit on basic health insurance, so funds are reinvested into healthcare services. Administrative costs for Swiss non-profit insurers are about 5% of premiums.

Japan: Japan’s health insurance system includes non-profit health insurance societies for employees and a national health insurance program for the self-employed and retirees. This system is designed to provide universal coverage at lower administrative costs. In Japan, administrative costs are around 1.5% of premiums.

Largest Health Insurance Companies in America

UnitedHealth Group

Annual Revenue: About $287.6 billion (2021).

Annual Profit: Around $17.3 billion (2021).

Market Position: UnitedHealth Group leads the market with extensive networks and comprehensive health plans, serving millions of customers nationwide.

Anthem, Inc.

Annual Revenue: About $137.6 billion (2021).

Annual Profit: Around $6.1 billion (2021).

Market Position: Anthem is known for its vast range of health insurance products and strong market presence, especially in individual and employer group insurance segments.

Centene Corporation

Annual Revenue: About $126 billion (2021).

Annual Profit: About $1.35 billion (2021).

Market Position: Centene focuses heavily on government-sponsored health programs, including Medicaid, Medicare, and the Health Insurance Marketplace.

Cigna

Annual Revenue: About $174 billion (2021).

Annual Profit: Around $5.4 billion (2021).

Market Position: Cigna is noted for its extensive global reach and comprehensive range of health services and insurance products.

Humana

Annual Revenue: About $83 billion (2021).

Annual Profit: About $3.35 billion (2021).

Market Position: Humana is a major player in the Medicare Advantage market, offering extensive plans and services for seniors.

CVS Health (Aetna)

Annual Revenue: CVS Health’s total revenue is about $292 billion (2021), with Aetna contributing significantly to this figure.

Annual Profit: CVS Health’s net income was about $7.9 billion (2021), with Aetna’s health insurance operations being a key profit driver.

Market Position: Aetna, under CVS Health, provides a range of health insurance products, including individual and employer plans, as well as Medicare and Medicaid services.

Potential Savings from Transitioning to Non-Profit Health Insurance in the U.S.

To estimate potential savings from switching U.S. health insurance to a non-profit model, consider the following:

Administrative Costs: For-profit health insurers in the U.S. spend a lot on administrative costs, including marketing, executive salaries, and profit margins. According to a study in the American Journal of Public Health, private insurers in the U.S. spend about 12-18% of premiums on administrative costs, while Medicare, a non-profit entity, spends about 2%.

Profit Margins: For-profit insurers aim to make profits for shareholders, which can range from 3-6% of their revenues. Eliminating the need for profit would mean more money could be spent directly on healthcare services.

Comparison with Non-Profit Models: Non-profit health insurers in other countries usually have lower administrative costs. For instance, administrative costs in Germany’s non-profit sickness funds are around 5-6%, and in Switzerland, they are about 5%.

Based on these factors, a rough estimate of potential savings can be made:

Reduction in Administrative Costs: If U.S. health insurers cut their administrative costs from an average of 15% to around 5% (a 10% reduction), this could save a lot of money. With total U.S. healthcare spending at about $3.8 trillion in 2020, a 10% reduction in administrative costs could save around $380 billion annually.

Elimination of Profit Margins: Assuming for-profit insurers generate an average profit margin of 5%, eliminating this could save an additional $190 billion annually (5% of $3.8 trillion).

Total Potential Savings: Combining the reduction in administrative costs and the elimination of profit margins, the U.S. could potentially save around $570 billion annually by switching to a non-profit health insurance model.

These savings could be used to improve healthcare access, reduce premiums, and enhance the overall quality of care. Implementing such a change would require significant legislative and regulatory efforts, but the potential benefits in terms of cost savings and improved health outcomes could be substantial.

References

1. "Healthcare System Overview: Sickness Funds," German Federal Ministry of Health.

2. "Switzerland's Healthcare System: A Model for America?" Health Affairs Blog.

3. "Japan’s Healthcare System: Low Costs and High Quality," The Commonwealth Fund.

4. "Administrative Costs in the U.S. Health Care System: Why Are They So High?" American Journal of Public Health.

5. "Medicare Administrative Costs as a Percentage of Total Expenditures," Centers for Medicare & Medicaid Services.

6. "Health Insurers’ Profit Margins," Kaiser Family Foundation.

7. "Healthcare System Overview: Sickness Funds," German Federal Ministry of Health.

8. "Switzerland's Healthcare System: A Model for America?" Health Affairs Blog.

9. "National Health Expenditure Data," Centers for Medicare & Medicaid Services.

10. "Health Insurers’ Profit Margins," Kaiser Family Foundation.