By NextBestFitInsurer overhead and profit
The net cost of private health insurance (premiums minus benefits) was $176.5B in 2024, about 10.7% of private premiums of $1,644.6B. It covers claims processing, networks, utilization management, marketing, broker commissions, taxes, and profit.
Evidence
- Health insurer net earnings were about $25B in 2023 and $9B in 2024 (margins of 2.2% and 0.8%).Sources: NAIC (2024)
Who's affected
Who is hurt
- People with employer coverage: Premiums pay for insurer overhead and profit.
Who gains while it lasts
- Health insurers, brokers, and their shareholders: Overhead and profit are insurers' income.
Under your mix of paths
Paths that fix or soften it
Using your saved plan. 0 paths picked.Edit all picks
Root causes
- Many payers duplicating the same functions
- Competition on marketing and network design rather than cost
Related costs
Open questions
- How many payers should there be: one, a few regulated nonprofits, or a competitive market?
Solution paths (2)
Open a path for what it fixes, what it creates or worsens, who gains and who loses, precedents, and how it connects to other paths. See all paths as a decision tree.
One public administrator with a published admin-cost target (e.g., under 3%).
- +Insurer overhead and profit
- +About $1 trillion a year in administrative cost
- −One payer becomes one target
- −Chronic underfunding by government budgets
- −Transition disruption: jobs, companies, and familiar coverage
Raise the required share of premiums spent on care, and require non-profit status, as in Germany or Switzerland.
- +Insurer overhead and profit
- +Losing the choice of health plan and insurer competition
- −Raises spending or loosens control over it
- −Requires difficult enforcement
Also addressed by paths for other problems
Single public payer for everyoneTens of millions of people have no coverageChosen
Private insurers stop administering covered care, so their overhead and profit on it end. Taiwan's administrative cost is about 1% of spending.