Why Is Health Insurance So Expensive?by Denise Early on May. 11, 2010, under Health
The seven largest American health insurance companies totaled over $265 billion in revenues in 2009. If 20% of these revenues are spent on things other than paying medical bills for people insured by these companies, that amounts to approximately $53 billion.
Administrative costs for these companies should be around 5% of revenues, leaving 15% for marketing, sales commissions, and really big executive salaries. That results is a $40 billion expense that Americans must add to their health insurance costs – a cost that no other country imposes on its citizens. This is one reason our health care system is so expensive.
Correction: In my recent post on health insurance companies becoming more like utility companies, I wrote (incorrectly) that two insurance companies together would have two trillion dollars in revenue in 2010. The correct amount is two hundred billion dollars (projected for 2010). Sorry about that mistake.
According to Fortune 500‘s 2010 list, the top seven health insurance companies in terms of overall revenues for 2009 were:
1. UnitedHealth Group – $87 billion
2. WellPoint – $65 billion
3. Aetna – $34.7 billion
4. Humana – $30.9 billion
5. Cigna – $18.4 billion
6. Health Net – $15.7 billion
7. Coventry Health Care – $13.9 billion
Stephen Hemsley – UnitedHealth Group
Total 2009 Compensation: $8,901,916
- Base salary of $1,300,000
- Stock awards of $4,122,694
- Option awards of $1,442,306
- Non-equity incentive plan compensation worth $1,950,000
- “Other compensation” including company matching contributions for a 401(k) plan and company matching contributions under an executive savings plan valued at $86,916