| Analysis finds that excluding pass-through medical costs puts UnitedHealth’s operating margin on par with leading biopharmaceutical manufacturers – but spends more on overhead and not on R&D |
WASHINGTON, DC – A new study commissioned by Insurance Watchdog Coalition found that actual profit margins for the nation’s largest health insurer are more than four times what it has claimed in public reporting. The study by economist Nam D. Pham, Ph.D., analyzed six years of annual corporate reporting by UnitedHealth Group. When pass-through medical costs (claims reimbursements paid to health care providers that are not retained by the insurer) are excluded from its revenue, UnitedHealth’s operating profit margin averaged 33.0% of gross profit from 2020 to 2025, compared with its average 7.6% net margin.
UnitedHealth Group claims that their profit margins are low while their health insurance premiums have sky-rocketed, with the costs of premiums now higher than most home mortgage payments. Yet standard accounting practices have allowed the insurer to include the full value of health insurance premiums as revenue, including the portion paid out as medical claims and never retained by the company. “Because these pass-through costs are neither retained by the health insurer nor reflect added value of the business, excluding these pass-through costs from revenues offers a more meaningful reflection of profit margins,” Dr. Pham states in the study.
Using this method, UnitedHealth’s actual profit margins are on par with the nation’s top pharmaceutical companies, despite the fact that the insurer performs no research and development. According to the study, UnitedHealth’s average annual gross profit from 2020 to 2025 was $79.9 billion, compared with an average of $29.9 billion for the 10 largest U.S. biopharmaceutical manufacturers by revenue. Operating profit as a share of gross profit averaged 33.0% for both UHG and the biopharmaceutical group over the period.
The study also compares how the two groups allocate operating costs. Biopharmaceutical manufacturers directed an average of about 52% of operating costs, or nearly 35% of gross profit, to research and development. UHG directed none of its operating costs to R&D; more than 93% of its operating costs, or 62.4% of gross profit, went to selling, general, and administrative expenses, including employee compensation, broker commissions, marketing, and administrative functions.
The full study, “What Health Insurance Companies Do Not Tell You About Their Profits,” and a one-page summary are available online at www.insurancewatchdogcoalition.com.es them. Patients should know this information before choosing a plan.
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Insurance Watchdog Coalition’s mission is to educate legislators, regulators, key opinion leaders, the media and the American people about the harmful impacts of vertically integrated insurance monopolies, especially in our healthcare system, which in turn will help create more competition in the marketplace, lower healthcare costs, and ensure that healthcare savings go to patients, not big insurers.