So, what percentage of your health insurance premium goes to profit for the insurer?

I researched several individual companies, and I turned to AI services to double check and aggregate information from different sources.

The fact is the great majority of what you pay in premiums goes to paying for healthcare for you or, if you are fortunate, for someone else.

Keep in mind that the majority of Americans do not use health insurance. They are either covered by Medicare, Medicaid, the VA or a self-insured employer plan which applies to about 60% of workers.

Health insurance companies in the U.S. are not allowed to keep most of your premium as profit. Federal rules (under the ACA) set strict limits through the Medical Loss Ratio (MLR) requirement.

Typical Profit Portion of a Premium

Here’s the breakdown:

1. Large-group plans

Insurers must spend at least 85% of premiums on medical care + quality improvement.
They can keep up to 15% for administration + profit.
Actual profits tend to be 3–5% of premiums once admin and overhead are accounted for.

2. Individual & small-group plans

Insurers must spend at least 80% of premiums on care.
They can keep up to 20% for admin + profit.
Real profit levels are usually 2–4% of premiums after expenses.

Why are large group insurers allowed to keep less of the premium? Because their cost of reaching customers is lower than in individual markets.

**So how much of your premium is profit?**

Usually only about 2–5%.
The rest goes to claims, provider payments, customer service, admin, marketing, and regulatory costs.

If insurers exceed the limit

They must refund the difference to you or your employer in the form of an MLR rebate.

The percentage of your health insurance premium that goes toward an insurer’s profit (known as the net profit margin) varies by insurer, market segment (e.g., individual, group, Medicare Advantage), and year.

It does not include administrative costs, taxes, or other overhead, which are typically 10-20% of premiums under Affordable Care Act (ACA) rules requiring 80-85% of premiums to fund medical claims (the medical loss ratio, or MLR). Profits are the remainder after all expenses.

Based on the most recent industry data (through 2024, with early 2025 trends), the average net profit margin for U.S. health insurers is around 2-4% of premiums. Here’s a breakdown:

• Overall industry average: 3% (median quarterly figure from 2012-2024, per CEIC data). This dropped to 0.8% for the full year 2024 due to rising medical costs and utilization (NAIC annual report).

• Large public insurers (e.g., UnitedHealth, CVS/Aetna, Humana, Elevance): Unweighted average of 3.2% in Q1 2024 and 5.3% in Q1 2025 (Oliver Wyman analysis), with a 2023 Q4 average of 5.1%.

• Accident and health segment: 4.99% trailing twelve months as of mid-2023 (Investopedia).

• Medicare Advantage plans: Higher at ~4.5% average margin in 2019 (latest detailed public data), though gross margins (before admin/taxes) averaged $1,982 per enrollee in 2023 (KFF).

• Historical context: Margins were 2.2% in 2008 and typically 6% ±1% pre-ACA, but regulations and post-pandemic cost spikes have kept them low (Washington Post/PNHP analysis).