> Where are these insurance companies' profit margins coming from?
Vertical integration.
UnitedHealthcare's (Larger insurance company in the US) profits are effectively limited by the Medical Loss Ratio rules from the Affordable Care Act.
But they are owned by UnitedHealth Group, which also owns OptumHealth (the largest network of physicians in the US), OptumRx (pharmacies), and OptumInsight (technology consulting, which goes into the COGS for UnitedHealthcare). This is where they make their profits.
UHG controls which physicians + pharmacies are in their network and what their negotiated rates for many services are (the exception being medicare + medicaid).
Vertical integration.
UnitedHealthcare's (Larger insurance company in the US) profits are effectively limited by the Medical Loss Ratio rules from the Affordable Care Act.
But they are owned by UnitedHealth Group, which also owns OptumHealth (the largest network of physicians in the US), OptumRx (pharmacies), and OptumInsight (technology consulting, which goes into the COGS for UnitedHealthcare). This is where they make their profits.
UHG controls which physicians + pharmacies are in their network and what their negotiated rates for many services are (the exception being medicare + medicaid).
Here's a write up on their strategy: https://www.unionhealthcareinsight.com/post/unitedhealth-gro...
And an infographic that breaks it down: https://static.wixstatic.com/media/be1b8b_b0d4ebb04ce04b44a3...