The Health Insurance Industry Is On Fire

The largest publicly-owned health insurers in America are United Healthgroup, WellPoint, Cigna International, and Aetna. (Blue Cross and Blue Shield are also dominant players in this industry, but it’s harder to get financial data on them.)

A couple of important points: Health insurance isn’t the inordinately profitable industry that Obama and his surrogates say it is. By my rough count, the four big public insurers are showing aftertax profit margins of barely three percent.

And their total profits add up to well under $10 billion a year. (Again, I’m excluding the Blues.) Obama tells us that health insurance costs too much because these companies make too much money. But even if he wipes out their profits completely, he’s nowhere near the $1 trillion or more that he’ll need in order to pay for a national insurance plan.

Do you suppose the market is saying that a public-health option is a nonstarter? Look at the stocks of those four companies for this week. They’re all up strongly, as much as 20%. In three days.

Or is the market saying that if the government takes over the low end of the insurance industry, that the private companies will take the top end and become a lot more profitable than they are now? I wish I knew the answer.