Insurers aren't the main villain of the U.S. health care system

In a post last week, I wrote about the progressive anti-monopoly movement’s increasing disconnect from reality. I wrote:[C]onsider the movement’s choice of targets. These include some industries with high profit margins, but also some with very low margins. These include grocery stores, airlines, and health insurers. Grocery stores and health insurers both consistently have much lower profit margins than American corporations in general, often hovering near the zero mark.Commenter Matthew argued that the low profit margins of insurers are not a reason not to worry about their market power:The idea that health insurers have “low margins” so they are OK is nuts…Private health insurers in the US do not lower costs and do not improve patient care…In the flow of money between patients and providers, private insurers just sit in that flow like a tapeworm and take money out to sustain themselves…There is a lot of evidence…[W]ith the current status quo, 10 -15$ out of every 100$ of healthcare premiums a person spends is just going to the private insurer….That would be fine if the insurance companies secured lower costs for their members; it would be the useful service they provide…But there is no evidence that they do.Matthew’s argument doesn’t really address the point of my post. Private insurers might be inefficient, or even unnecessary, but this is very different from them being extractive monopolies. It is absolutely incredibly relevant that health insurers have very low profit margins. If $10 of every $100 spent on health care premiums goes to the insurer, but the insurer isn’t profitable, this just means that the $10 is going to cover the insurer’s operating costs. It is not money being funneled into the pockets of the people who own the insurance companies. In fact, the more general fact here is that private insurers are not the main reason why American health care costs so much more than health care in other developed nations. Almost all of the excess cost goes to providers rather than to insurers. Private insurers may be an unnecessary middleman, but the amount they extract from the system is not large compared to the amount that gets either appropriated or wasted by the people providing the care. So why do Americans — especially American progressives — focus so obsessively on health insurers instead of health providers?

In a post two years ago, I hypothesized that it’s because insurers are the part of the system we have direct contact with — the people who have to tell us “no” when we can’t afford some treatment. Insurers have thus become what Jeremiah Johnson calls “sin-eaters” — the hapless fall guys who bear the brunt of all Americans’ rage, despair, and frustration at a broken system in which the insurers play only a very minor role.Jeremiah Johnson 🌐@JeremiahDJohnsInsurance companies are sin-eaters for every other pathology in America's healthcare system.

There are a LOT of broken parts of the US healthcare system, and it's remarkable how much blame insurance gets relatively to literally anything else.Secular Talk (KyleKulinskiShow@bsky.social) @KyleKulinskihttps://t.co/M0kVWbBJA85:28 PM · Apr 26, 2026 · 78.1K Views52 Replies · 95 Reposts · 1.44K LikesThe more progressives focus on venting rage and making accusations at insurance companies, the less effective they will be in actually delivering Americans cheaper health care. Anyway, here’s the post I wrote back in 2024, which fleshes this all out in greater detail.“I’d rather die than owe the hospital til I get old” — Courtney BarnettWhen UnitedHealthcare CEO Brian Thompson was gunned down in the street in cold blood the other day, a bunch of people on the internet gloated and cheered:The jokes came streaming in on every social-media platform, in the comments underneath every news article. “I’m sorry, prior authorization is required for thoughts and prayers,” someone commented on TikTok, a response that got more than fifteen thousand likes. “Does he have a history of shootings? Denied coverage,” another person wrote, under an Instagram post from CNN.

On X, someone posted, with the caption “My official response to the UHC CEO’s murder,” an infographic comparing wealth distribution in late eighteenth-century France to wealth distribution in present-day America…On LinkedIn, where users post with their real names and employment histories, UnitedHealth Group had to turn off comments on its post about Thompson’s death—thousands of people were liking and hearting it, with a few even giving it the “clapping” reaction. The company also turned off comments on Facebook, where, as of midday Thursday, a post about Thompson had received more than thirty-six thousand “laugh” reactions.In general, I think it’s a very bad look to endorse murder. And I think this kind of thing is a sign of how stressed-out and mentally unbalanced our country is after an era of unrest. (The chief suspect, who was just apprehended, looks like a random crazy guy rather than a leftist ideologue.)But more fundamentally, I think the outpouring of schadenfreude1 at Thompson’s killing reflects some deep-seated popular misconceptions about the U.S. health care industry. A whole lot of people — maybe even most people — seem to regard health insurance companies as the main villains in the system, when in fact they’re only a very minor source of the problems.All my life, Americans have been raging at health insurers. Who could forget this clip from the 1997 movie As Good as It Gets?It’s not hard to understand why people hate health insurers. When you interact with the U.S. health care system, the providers — the hospital staff, the doctor, the nurses, the technicians — all just take care of you. The only time they ask you for money during your doctor visit is when you pay your copay at the front desk, and that’s usually not that big — if the bill is big, they’ll send it to you later. So for the most part, your interaction with the providers is just you walking up and asking to be taken care of, and them taking care of you.Your interaction with the health insurer, on the other hand, feels like a struggle against an enemy who wants to destroy you. If you get a big hospital bill days after your visit, it’s because the insurer wouldn’t cover the whole cost.

If the bill is a surprise because the provider didn’t tell you they were out of network, that also feels like the insurance company’s fault — why wasn’t that provider in their network?Even more terrifying is when insurers deny coverage completely, which happens to about 10-20% of claims. It feels like you’ve been robbed. You paid this company a hefty premium every month, and in exchange you expected them to pay for your health care if you needed it. And now you needed it, and they won’t even uphold their end of the bargain? Why were you even paying them the premium in the first place?Everyone knows that denying claims is in the insurance company’s financial interest. The more they can get away with taking your monthly premium and then weaseling out of their end of the bargain, the more their shareholders and executives can walk away with giant bags of money. They’re the ones buying huge houses and yachts and whatever on the money they made from finding some technical reason to send you and thousands upon thousands of people like you into medical bankruptcy after your chemotherapy. Who wouldn’t be mad?And yet when we take a hard look at the question of why Americans pay so much more for their health care than people elsewhere in the developed world, insurance companies and their profits just aren’t that big of a piece of the story.First of all, insurance companies just don’t make that much profit. UnitedHealth Group, the company of which Brian Thompson’s UnitedHealthcare is a subsidiary, is the most valuable private health insurer in the country in terms of market capitalization, and the one with the largest market share. Its net profit margin is just 6.11%:That’s only about half of the average profit margin of companies in the S&P 500. And other big insurers are even less profitable. Elevance Health, the second-biggest, has a margin of between 2% and 4%. Centene’s margin is usually around 1% to 2%. Cigna Group’s margin is usually around 2% to 3%. And so on. These companies are just making very little profit at all.Here’s another way of visualizing that:You can see that the company’s net income — i.e., its total profit — was $23.1 billion in 2023.

That’s a lot of money, but it pales in comparison to the $241.9 billion that the company spent on medical costs. Even the company’s $54.6 billion in operating costs — of which Brian Thompson’s own $10 million salary represented 0.018% — are dwarfed by actual medical costs. In fact, the actual health insurance business — taking premiums and paying out claims — is even less profitable than these numbers might suggest. As Axios recently reported, insurers’ profits are increasingly coming from other lines of business. What does this mean? It means that if UnitedHealth Group decided to donate every single dollar of its profit to buying Americans more health care, it would only be able to pay for about 9.3% more health care than it’s already paying for. If it donated all of its executives’ salaries to the effort, it would not be much more than that.What about those denials of coverage, copays, deductibles, and so on? In fact, Americans are paying a smaller percentage of their health costs out of pocket than people in most other rich countries!Note that the song lyric at the top of this post, about a woman in anaphylactic shock worrying that she won’t be able to afford her hospital bills, is from a band in Australia, not the U.S. This isn’t a coincidence — although Australian medical costs are fairly low, the proportion they pay out of pocket is unusually high.In other words, Americans’ much-hated private health insurers are paying a higher percent of the cost of Americans’ health care than the government insurance systems of Sweden and Denmark and the UK are paying. The only reason Americans’ bills are higher is that U.S. health care provision costs so much more in the first place.On top of all that, health insurance companies don’t actually look very inefficient, in terms of their administrative costs. Yes, we all know that the fragmented U.S. health system is a paperwork nightmare, with different providers and insurers drowning each other in forms and approvals. And Elizabeth Warren has claimed that switching to national health insurance would save huge amounts of money by reducing administrative costs. But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care.