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Comment by smithkl42 | Hacker News Reader

If you think that insurance companies have "light regulation", I shudder to think of what "heavy regulation" would look like. (Source: I'm the CTO at an insurance company.)

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Light did not mean to imply quantity of paperwork you have to do, rather are you allowed to do the things you want to do as a company.

More compliance or reporting requirements usually tend to favor the larger existing players who can afford to do it and that is also used to make the life difficult and reject more claims for the end user.

It is kind of thing that keeps you and me busy, major investors don't care about it all, the cost of the compliance or the lack is not more than a rounding number in the balance, the fines or penalties are puny and laughable.

The enormous profits year on year for decades now, the amount of consolidation allowed in the industry show that the industry is able to do mostly what they want pretty much, that is what I meant by light regulation.

I'm not sure we're looking at the same industry. Overall, insurance company profit margins are in the single digits, usually low single digits - and in many segments, they're frequently not profitable at all. To take one example, 2024 was the first profitable year for homeowners insurance companies since 2019, and even then, the segment's entire profit margin was 0.3% (not 3% - 0.3%).

https://riskandinsurance.com/us-pc-insurance-industry-posts-...

It's an accounting 101 thing to use all tricks in the book to reduce the reported profit, to avoid paying taxes on that profit.

Insurance companies vote with their feet. The practical reality is that if insurance companies are able to make money in a given state, they'll stay in that state. Insurance companies fleeing states like CA or FL in droves is a really good indication that the actual, hard reality on the ground is that they can't make money when the regulations are stacked against them. That's fine for insurance companies - they'll just go somewhere else - but it's really bad for the people who need insurance.

The total profit of ALL US health insurance companies added together was $9bln in 2024: https://content.naic.org/sites/default/files/2024-annual-hea.... This is a profit margin of 0.8% down from 2.2% in the previous year.

Meta alone made $62bln in 2024: https://investor.atmeta.com/investor-news/press-release-deta...

So it's weird to see folks on a tech site talking about how enormous all the profits are in health insurance, and citations with numbers would be helpful to the discussion.

I worked in insurance-related tech for some time, and the providers (hospitals, large physician groups) and employers who actually pay for insurance have signficant market power in most regions, limiting what insurers can charge.

They have too much regulation, and too little auditing (at least in the managed healthcare business).

I agree, and I can see where it comes from (at least at the state level). The cycle is: bad trend happens that has deep root causes (let's say PE buying rural hospitals because of reduced Medicaid/Medicare reimbursements); legislators (rightfully) say "this shouldn't happen", but don't have the ability to address the deep root causes so they simply regulate healthcare M&As – now you have a bandaid on a problem that's going to pop up elsewhere.

I mean even in the simple stuff like denying payment for healthcare that should have been covered. CMS will come by and out a handful of cases, out of millions, every few years.

So obviously the company that prioritizes accuracy of coverage decisions by spending money on extra labor to audit itself is wasting money. Which means insureds have to waste more time getting the payment for healthcare they need.

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