Nonprofit Health Insurers: The Story Wall Street Doesn't Tell

Abstract

For several years, Wall Street investment firms have campaigned for conversion of nonprofit health insurers to investor ownership, arguing that an infusion of equity capital is critical to insurers' survival. However, closer examination of the financial performance and capital position of not-for-profit health plans shows that: □ The lower operating margins reported by not-for-profit health plans very likely reflect the organizations' corporate missions to serve their communities by minimizing the cost of coverage and their ability to invest all gains back into the company for the future benefit of their customers. Their investor-owned counterparts must generate higher margins to give shareholders a return on their investment. □ Compared with investor-owned insurers, not-for-profit health plans use a significantly higher percentage of the customers' premium dollar to pay health care claims. A lower percentage goes for administrative expenses. □ Over the past 10 years, not-for-profit health plans have succeeded in using operational and investment gains to build and retain a strong capital position—stronger than that of investor-owned companies—while investing heavily in infrastructure, product development, and market growth.