Insurance company competition is not going to lower your premiums. Here’s why!
The Trump administration and Republican’s obsession with shifting federal responsibilities to the states and individuals is destroying the social structure of America. The latest victim seems to be healthcare.
The very notion of allowing states to opt out of Obamacare, to then set up their own exchanges in the name of competition clearly demonstrates these politicians have no idea how health insurance works or why competition among insurers is a red herring.
They are simply obsessed with their ideology of small government, practical or not.
To make matters worse, they expect individuals to negotiate better deals – from where? The same insurance companies in Obamacare‼️
How you obtain health insurance could vary by where you live and how you decide to use a health savings account.
A United States with fifty different health insurance systems…brilliant ‼️
The entire proposal is nuts, naive, chaotic, irresponsible, unnecessary and unfair to millions of Americans.
Just what percentage of a health insurance premium do they think is subject to competitive pricing, especially without lowering the coverage provided? Well ⬇️
Administrative + Profit (Subject to competition) — 15–20%
About $120–$160 per month is where insurers actually compete.
This covers:
- Claims processing
- Customer service
- Billing
- Technology
- Marketing
- Broker commissions
- Executive salaries
- Profit margin
This is the portion insurers can improve with efficiency or scale.
Do the math! $1,000 premium, 20% administrative = $200 – maybe an insurer squeezes out 5% savings to be competitive = $10.00 premium reduction or maybe it’s $7.50 maybe.
Typical profit margins for health insurers
- Many analyses put the average net profit margin for U.S. health insurers somewhere in the 2 % to 5 % range. Every CRS Report+2Nginx IWS+2
- A long-running study covering 2012–2020 found a median net margin of about 2.85 %, with modest fluctuations and an industry-wide net of roughly 3.3 % in recent years. Matthew Iws+1
- For large publicly traded insurers, margins vary more: in recent quarters some firms have posted net income / premium ratios of 4 %–7 % (though results shift quarter to quarter). JAMA Network+2Oliver Wyman+2
- According to a recent 2024 industry report, however, margins fell because of rising medical costs and utilization — for that year as a whole, the overall industry net margin dropped to about 0.8 %. NAIC
So roughly speaking: most years ~2–5%, some years lower, and for some large insurers or favorable quarters ~4–7% (or in rare cases slightly higher).
Profit margins are low because 80-85% of premium income is paid out in healthcare claims.
Now, compare insurance company profit with all large companies.
What’s the net margin for S&P 500 now
- As of Q3 2025, the blended net profit margin for the S&P 500 was ≈ 13.1%, the highest level recorded (in FactSet’s history back to 2009). FactSet Insight+1
- For Q4 2024, it was ≈ 12.1%, reportedly below the previous quarter but above the 5-year average. FactSet Insight
- In Q2 2025, it was ~ 12.3%. FactSet Insight
So, broadly speaking: the S&P 500 net margin today sits in the ~12–13% range (trailing quarters).
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