When Brian Thompson was shot dead on a New York street this week he became a cultural symbol.
Thompson (photo, left), 50, was the youngish-looking, $10 million-a-year CEO of the health insurance division of UnitedHealth Group, the world’s 9th largest corporation by revenue.
He had personal baggage; he and his estranged wife lived in separate mansions (view his digs here), and he was being investigated for insider trading (see story here). But that’s not why he was killed, nor what’s behind the public’s lack of sympathy for him (see story here).
The brazen, broad-daylight assassination of a top insurance executive uncorked a geyser of pent-up rage at health insurance companies that take subscribers’ money and then deny claims.
Huffington Post describes the practice as “insurance injustice” (see story here). Many ordinary people view it as modern-day piracy.
BBC News explains, “The latent anger felt by many Americans at the healthcare system – a dizzying array of providers, for profit and not-for-profit companies, insurance giants, and government programmes – burst into the open” with Thompson’s murder (read story here).
To these people, Thompson symbolizes unbridled greed in America’s private health insurance business. Public frustration with an overly complicated, highly stressful, and seemingly arbitrary insurance claims approval and denial system is nearly universal.
BBC News says, “UnitedHealthcare and other insurance providers have faced lawsuits, media investigations and government probes over their practices,” which seem designed to deny coverage after policyholders incur crippling medical expenses. Or, put another way, patients put through this process see a deck stacked in the companies’ favor.
What does UNH’s profit picture look like? According to investment publication Value Line, which updated its profile of the company on November 29, 2024, the entire company (there’s no breakout for the insurance division) will earn profits of roughly $25.3 billion from revenues of about $401 billion in 2024, a net profit margin of about 6.3%. That’s unspectacular.
Then where is policyholder money going, if not to profit? Well, for one thing, UNH like other insurance companies employs a large bureaucracy to process claims. Many years ago, I read estimates as high as 28% of premium dollars going for administration and overhead, compared to under 2% in the Medicare program.
But the advent of the Affordable Care Act (aka “Obamacare”) has halved that; and comparing private insurers’ expenses with Medicare’s is apples-to-oranges (see PolitiFact article here); e.g., Medicare doesn’t have marketing or enrollment expenses. UNH policyholders pay for the glossy brochures cluttering your mailbox every year during open enrollment.
Insurers typically pay out around 80% of premium income in claims, while roughly 14% goes to administration, overhead, and marketing, and 6% to profits. So in reality, $4 of every $5 premium dollars pay for health care. Maybe that’s not enough, but it’s still the bulk of the money collected by insurance companies from their customers.
The real problem is that health care is incredibly expensive. As costly as health insurance is, it doesn’t buy very much health care. In Washington State, as of November 2024, the average cost of a hospital stay is over $3,800 per day (see article here). In 2021, the U.S. average cost of an emergency room visit was over $2,900 (see article here).
America is famously a consumer culture, and Americans always want more than they pay for. They want to get Cadillac health care, but pay for a Ford. So you’re dealing, to a degree, with unrealistic expectations.
When a person goes to a hospital, the potential costs are open ended (see, e.g., stories of hospitals charging $500 for a nurse-administered aspirin). Needless to say, insurance companies have to limit their exposure, or they’d be bankrupted by claims. So they negotiate prices with providers, exercise utilization controls, and impose coverage limits and exclusions.
For consumers this is a problem. Nobody reads the fine print of their policies, least of all during an ambulance ride to an emergency room. Before ACA, medical bills were by far the leading cause of personal financial bankruptcy in the U.S., and reading a medical billing summary was a terrifying experience for most. ACA limited, but did not eliminate, medical billing surprises and beartraps.
It’s not so much what health insurers like UNH don’t cover, as how they don’t cover it, that makes them reviled by their policyholders (for a specific example, read a mother’s poignant story here). Unpredictability of coverage, and nerve-rattling exposure to financial ruin, frightens and unhinges policyholders. Having to battle against insurance company bureaucrats tasked with denying claims infuriates people who believed they were insured.
Other countries manage better than we do. The U.S. is widely regarded as having the worst health care system of any developed country. It’s criticized for being too expensive and producing subpar outcomes.
Other countries rely more on government-run health care than we do. Our culture is fixated on “free choice” of insurance and care providers. Single-payer or government-provided health care hasn’t caught on here.
But that freedom comes at a steep financial cost, with needless complexity, and individual financial risk. Consumers are drowned with incomprehensible paperwork. This is the real problem with our system.
Those gunshots on a New York sidewalk, and the public outrage against insurance companies that followed, likely won’t change it. Now watch the video below.
Related article: A Vox writer’s analysis of the psychology behind the public vitriol directed at Thompson after his death posits that “many people are out of patience with being asked to have compassion for those who have shown little for people in their care, for humanity, or for the planet.” Read that article here.