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by lotsofpulp 1970 days ago
All the biggest insurers in the US own their own PBM. The profit margins are shown in the 10-K filings.

All the insurers have profit margins in the 3% to 5% range. Where is all this extra profit that the middlemen are making?

Even if the PBM division is earning more profit than others, it's simply offsetting losses elsewhere.
1 comments
wefarrell 1970 days ago
That 2-3% is for the insurance layer, not the parent organization.

Consider CVS Health which owns Aetna (an insurer), Caremark (a PBM) and CVS (a pharmacy). Aetna is required to spend 80% on premiums whereas Caremark and CVS face no such constraints on their profit margins.

There's a reason why there's so much M&A in this space while consumers are simultaneously facing higher premiums.

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lotsofpulp 1970 days ago
The 3% to 5% profit margin is for the whole company. For all the hate health insurers get as profiteering parasites, their owners sure aren’t pocketing much.

United health at 6%

https://finance.yahoo.com/quote/UNH/key-statistics/

Similarly, Anthem at 4.22%, CVS at 3%, Cigna at 3.38%, Humana at 5.58%, Molina at 4.57%, Centene at 2.12%.

The reason there’s so much M&A in this space is because there’s no margins, so it’s either go big and win in economies of scale, or go home and go out of business. And people face higher premiums because more people are getting more access to healthcare. There’s no lifetime benefit maximums or pre existing condition exclusions anymore. And the highest premiums are capped at 3x the lowest premiums.

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wefarrell 1970 days ago
UNH shareholders would disagree - I've made 10x on it.

Net income is a poor metric here. It includes acquisition costs (and interest paid on debts for said acquisitions).

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lotsofpulp 1969 days ago
Net income over a long period of time is appropriate in my opinion. They consistently hover around 5% for 15+ years. It’s a pretty competitive market.

https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...

I don’t see a lot of juice to squeeze in insurance companies in general.

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wefarrell 1969 days ago
They're using their profits to buy their competitors and downstream partners, which in UNH's case has allows their market cap to grow 10x in 10 years.

The 5% that you quote is after those acquisitions (and taxes) and is not a true indicator of profit.

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