Demagoguing Profits

In his ongoing war against insurance companies, Keith Olbermann took another cheap shot last night. The written word does not really do this justice, you really need to listen to the clip to hear the sarcasm and contempt with which he delivers this little treasure of contumely,
(emphasis is mine, and this is about 2:40 into the clip)

Chairman Waxman of the House Energy and Commerce Committee revealing that his investigators had found internal WellPoint documents which proved the company was raising premiums merely to pad its profits to a target of 7 percent. Yesterday at a hearing, in California, a company executive having testified that the company had no interest in anything other than slimmer profits of 2 percent to 5 percent, you know, nothing at all, next to nothing—only $2 billion to $4 billion. WellPoint‘s CEO Angela Braly arguing that her company‘s profit margins are modest compared to other sectors of the economy—you know, like Europe.

I can find no quote from any WellPoint executive to the effect that it “had no interest in anything other than slimmer profits of 2 percent to 5 percent.” I did find a couple saying that it projected those profit levels, but none saying that it was happy and delighted with them, and I would be astonished that any business would accept that level of profit. The only business that I know of right now which is operating on that slender of a margin is the grocery business, and grocery chains are notoriously on the brink of disaster.

As to “other sectors of the economy—you know, like Europe,” well, how about other sectors of the economy like General Electric; the company that Keith Olbermann works for. According to Reuters on Jan 22, the 7% that Olbermann decries is the profit margin that GE achieved in 2009, and that was a decrease from the preceding year. The numbers are not entirely clear in the article, but it appears that in 2008 GE made about 13% profit margin, and the forecast for 2010 is for a 21% profit margin.

According to The Street, most health insurance companies make less than 7% profit, and virtually all of them spend very close to 90% of the premiums they take in on medical bills for the people they insure. Hospital companies, on the other hand, average 30% profit margins, and pharmaceutical companies average 50% profit margins.

But certainly health insurance is the “evil empire.” And the 7% margin that represents an outrageously high profit for insurance companies is an unacceptably low profit for the company that employs Keith Olbermann. Somebody will need to explain that logic to me, because I don't get it.