By Tom Curry National affairs writer
updated 10/16/2009 11:46:58 AM ET 2009-10-16T15:46:58

Claim: Insurance firms such as WellPoint and UnitedHealth are extremely profitable and will be more so once the reform bill passes.

Insurance firms, which handle coverage for nearly 180 million Americans, have a big stake in the reform bill that Congress is designing. Democrats’ bills would require most uninsured people to purchase insurance. Depending on how stringently this requirement is enforced and who is exempted, the mandate could mean 20 million new customers for private-sector insurers. The Senate Finance Committee would send $460 billion in subsidies over 10 years to people to purchase coverage, with much of this money going to insurance companies. An unseemly windfall for an already thriving industry?

Fact or fiction?
Little of both. Assessing the effect of the Finance Committee's bill, committee member Sen. Blanche Lincoln, D-Ark., said, "With an estimated 20 million new customers, and their corresponding premium dollars rolling in, we can most definitely assume that health insurance companies will have additional profits coming in." In 2008, Wellpoint’s 10-K report filed with the Securities and Exchange Commission said its net income as a percentage of revenue was 4.1 percent, so it made 4 cents in profit for every dollar of revenue. Likewise, UnitedHealth made about 4 cents in income for each dollar of revenue. By contrast, Occidental Petroleum netted about 28 cents for every dollar of revenue and pharmaceutical maker Pfizer made 17 cents for every revenue dollar. While insurance firms are profitable, firms in other industries reap far higher profits.

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