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- Hacker News
- This is a crime against humanity.
- Well this hasn't been peer reviewed whatsoever, WOW.by schlap
- If you substitute the word "Claims" for the word "Reveals" then the headline is honest.by jeffbee
- UnitedHealth just raised my monthly premium by 25% for 2026-27
- Some of this has to do with limits from the ACA (Affordable Care Act), which limited the margins of insurance companies. It creates incentives for higher premiums, but also these types of gains, which is just bad for everybody.
I don't think there's much you can look at with the Affordable Care Act and think that it was a success.
by mchusma - I don't understand.
Brokers quite correctly do not count the value of the shares because they never actually see it. But that's not the way insurance works--while dollars flow in and dollars flow out they are not remotely the same dollars. This feels like someone is trying to lie with statistics.
by LorenPechtel - >I don't understand
If you don't understand why are you commenting?
Your response makes absolutely no sense at all.
by johnpedantic - @getnormality Two main differences:
1) medical loss ratio rules mean insurers are expected/required to pass a certain percent of premium on as payment for medical services, in a way that a grocery store is not required
2) insurer is selling you a contract that they will pay your medical bills if you have any - they are NOT retailing you medical services
3)
by CGMthrowaway - Insurers in the US actually are retailing you medical services. All the large insurers own huge (and growing) numbers of medical providers and they use their insurance plans to abuse non-owned medical providers into selling out to the insurer.by estearum
- Somewhat related perhaps, "Universal Health Coverage Could Save $1 Trillion and 114,000 Lives Every Year, Yale Study Projects":
* https://ysph.yale.edu/news-article/universal-health-coverage...
Study:
by throw0101d - It's hard for me to trust this PDF when there's literally a typo directly under the author's name: "analyitcs"by John7878781
- It's hard for me to trust anyone that whines on a forum about pedantics.by johnpedantic
- typos mean its more likely to have been made by a human.by parpfish
- It's hard for me to trust it when https://en.wikipedia.org/wiki/Robert_Aderholt is the chairman.by EA-3167
- At the same tiem, lately I've been inserting small typos in my writing just to signal that it's not LLM generated. Nothing is a bigger red flag than a wall of text with perfect grammar and punctuation.
- The nice thing about stuff like this is that you can check the stock price to see if it's actually meaningful. You're not gonna surprise a bunch of wallstreet analysts with a finding that profits are actually 4x, and if you do, the gap up in stock price would be near instant.
That being said, while $UHG has had a good year, the stock is still underwater from where it's been since 2021, and no noticeable movement from this report.
by WarmWash - It's possible for both profits to be up 4x or whatever and also Wall St to consider many other factors than profit when pricing the stock.by imglorp
- > Conventional accounting measures portray large health insurers such as UnitedHealth Group (UHG) as earning relatively low profit margins because they treat premium dollars that are subsequently paid out in medical claims as revenue. However, these medical claims are pass-through costs, not income retained by the insurer.
I don't understand this claim. Doesn't every business have costs to make its goods and services, and revenue when those are sold? A grocery store sells food and uses the money to buy more food, pay its employees, reinvest etc, and the profit leftover goes to the owners. An insurance company sells policies and similarly uses the money to pay claims, pay employees, reinvest, and profit. Why is the insurance company's sales revenue pass-through and the grocery store's sales revenue not?
Update (30 minutes in): the replies so far all seem very superficial. Yes, I know that insurance is not exactly the same as grocery stores. This does not explain why they should suddenly be treated differently from an accounting perspective despite what everyone else before this moment has done.
by getnormality - I think its more anologous to a bank giving out a loan. There, rhe bank doesnt count any principle repayments as revenue, only interest repayments. The principal repayments are what the bank is "returning" to whoever owned the money in the first place. The interest is for the banks actual financial service. The implication being that insurance providers arent providing medicine, they are providing financial liquidity just like the bankby samrus
- Insurance companies often have a parent company. That parent company owns healthcare providers and pharmacies.
So it goes something like this
United Health Group -> United Health Insurance United Health Group -> Sunshine Hospital.
United Health Insurance has a profit cap, it’s a % of revenue. Sunshine Hospital has no cap. So Sunshine Hospital charged United Health Insurance X$ and that profit rolls up to United Health Group.
by digi59404 - I'm not an accountant and don't claim to have a clean answer to how it should be accounted, but I hope I can highlight the conundrum.
Suppose you run a brokerage or some kind of marketplace enabling transactions. Should all transactions passing through your platform be considered your revenue? Or only the part that stays with you for the services you provide, while deducting the component which is simultaneously directed to the transaction counterparty?
In one simple perspective, calling these revenue and inventory would make sense only in a world where you hold on to the cash and the goods for extended periods, so they need to be appropriately accounted for in your books among cash flows and balances.
So what should be the correct accounting model for an insurance service that collects premiums and holds on to your money and pays later for services once you avail them?
I imagine that so long as they are taking on the risk of how much service you might avail rather than simply putting a stop at how much you've paid them in advance, then the premiums they collect ought to be considered revenue, to balance against the as yet unknown inventory costs.
by ssivark - An intuitive explanation is that financial products are, approximately, buying and selling as part of the same transaction. You can't separate the "selling premiums" part from the "paying out claims" part.
This is true of life insurance, investment firms, and banks. It's also true of marketplaces that connect buyers and sellers, like Etsy.
Groceries stores are buying from suppliers and selling to consumers, but those are separate operations. If the consumers opt out, the grocery stores (temporarily) still have a full and complete obligation to their suppliers. It's hard to sell to customers without supply, but if you try hard, you could theoretically do that as well.
Somebody with a better financial background might be able to define the nuances of accounting practices here, but there's already a pretty meaningful line that's established. It is kind of weird that health insurance doesn't behave like a financial product.
by trjordan - The ACA tried to address this sort of thing with a Medical Loss Ratio [1]. This basically meant that 80% of premiums had to be spent on healthcare. This has two obvious flaws:
1. Certain government contracts are what are called "cost plus" contracts. These have the same flaw. If the contractor earns 20% above "costs", they're incentivized for a cost blowout. Same with insurance premiums. If you have $100B in premiums, then $20B doesn't have to be spent on healthcare. But if premiums were $1T, then that same ratio is $200B. It incentivizes insurers to raise premiums; and
2. Health insurers cheat on the ratio by moving profits elsewhere. For example, UHC has a pharamaceutical benefits manager ("PBM"). Sounds inocuous but it's evil. PBMs bulk negotiate with drug suppliers but can basically keep the volume discount as an extra profit. PBMs do much more such as constantly force what medications are covered to force people to ssee providers even and get a prescription for whatever the new medication is even if they're stable on current medications. The whole point is to make people give up (or die).
But health insurance companies also own providers like hospitals and medical providers, either directly or through thinlyhh veiled subsidiaries meant to hide profits and that corporations are making healthcare decisions (something certain states have laws against).
The whole thing is a ridiculous system and needs to be scrapped.
[1]: https://www.cms.gov/marketplace/private-health-insurance/med...
by jmyeet - I just scanned the doc but I think your question is the core argument of the doc. It explicitly says that United is using standard accounting practices and proposes the “pass through” mechanism as a “better” metric.
Based on the source I, personally, don’t find it to be a credible argument
by mikeryan - The Traditional View (How it actually works): If an investment fund manages $1000 of your money and charges a $150 management fee while keeping your $1000 completely separate, they made $50 on $150 of sales and have a 33.3% profit margin.
The "Insurance Style" View (If they copied UHG's model): If an investment fund counts your $1000 deposit as their own revenue and treats buying stocks for you as their own cost, they made $50 on $1150 of sales and have a 4.3% profit margin.
The distinction is that the insurance company is not selling you medical services; those are covered by your and other clients' own money. They are selling the service of managing a central fund to reduce risk for the people who are part of it. For them to claim that you were paying them for medical services, they shouldn't just be covering the hospital bills—they should be operating the hospital and buying and selling the drugs themselves. It might feel like they do that, but this is actually done by the healthcare providers and pharmacies, with the costs merely covered by the insurance fund.
Grocery-Bagging Analogy: Imagine you pay a teenager $10 an hour to help bag customers' groceries. In that hour, $2000 worth of groceries get bagged, and your business takes a $100 fee from the store for the service. After paying the teenager, you pocket $90.Do you claim a 90% profit margin on your $100 service fee? Or do you claim that your "costs" were $2010 because you included the value of the customers' groceries, pretending your margin was a measly 4.3% while walking away with almost all the fee?
by klustregrif - I believe they are saying that only the portion of premiums paid by UHG customers _that are not_ spent on paying out claims should be counted as UHG revenue. That is if I and my employer pay UHG $18,000 over the course of the year and UHG pays out $2,500 to my doctors and to cover my prescriptions, only the remaining $15,500 should be counted as UHG revenue.
The thinking here is that because UHG is legally obligated to pay out claims, this money only "passes through" their hands. I believe the legal obligation is the thing here.
Anyway, if these pass through costs (the claims they are legally obligated to pay) are removed from the equation then their revenue number is smaller and their profit margin is larger.
by cmiles74