(image: Mike Licht, NotionsCapital)

It is another year for record profits for the health insurance industry. From the New York Times:

The nation’s major health insurers are barreling into a third year of record profits, enriched in recent months by a lingering recessionary mind-set among Americans who are postponing or forgoing medical care.

The UnitedHealth Group, one of the largest commercial insurers, told analysts that so far this year, insured hospital stays actually decreased in some instances. In reporting its earnings last week, Cigna, another insurer, talked about the “low level” of medical use.

Yet the companies continue to press for higher premiums, even though their reserve coffers are flush with profits and shareholders have been rewarded with new dividends. Many defend proposed double-digit increases in the rates they charge, citing a need for protection against any sudden uptick in demand once people have more money to spend on their health, as well as the rising price of care.

This self-feeding cycle is one fantastic racket. The for-profit insurance companies have unnecessarily raised premiums and deductibles so much that regular people are unable to afford actually using the coverage they have. And, at the same time, the insurance companies have the chutzpah to use the fact that people can’t afford to use their insurance to justify even bigger premium hikes. That, of course, will make it even harder for people to afford to use their insurance.

Of course, the insurance companies are trying to defend their profits by claiming their profit margins aren’t that high, but that is nonsense. Unlike industries that produce things or services with added value, the insurance business adds no value. At its core, it just collectively holds people’s money until it is needed. Any “profit” is just money the companies skim from these collective holdings. Given that the government directly subsidizes almost all of the billions spent on health insurance in the country, there is zero justification for allowing the health insurance companies to make any profits at all. Of course, that is why almost every other developed country doesn’t allow companies to make a profit off of basic health insurance.