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Categorized | Featured, Opinion

Corporate ‘Greed’ vs Government Stupidity

Corporate Greed has become the battle-cry of the left. Any company that makes a profit is immediately evil and greedy, according to these self proclaimed “experts”. One must assume that a company that operates in the red must be inherently good, in a liberal’s mind.

And if the offending corporation happens to be an insurance company, they are the worst of the worst. How dare they make billions in profits by overcharging customers? The government needs to take over health care and make it all fair.

Consider the following simple examples of two insurance company business models:

Both companies insure the same number of people, both companies have the same overhead and the same amount of claims paid. For simplicity, let’s say that both companies have 1 million customers, $100 million in overhead and they average paying out $300 per customer each year.

This works out to $300 million in claims that will be paid, and another $100 million in overhead, a total of $400 million per year going out. In order to break even, the insurance company will need to charge $400 per year to all 1 million customers.

Insurance Company #1 does exactly that. They charge each customer $400 per year for insurance, and break even.

Insurance Company #2 does things a bit differently. They know that in any given month they can invest 70% of the premium they receive from the customers and make a small bit of money safely with guaranteed short term investments. At a 2% rate of return, this company can earn $5.6 million per year. Lets say they decide to return half of the investment income to the customers in the form of lowered premiums and keep half as profit. Company #2 can provide the same insurance coverage for $397.20 and still make a profit of $2.8 million.

This is a very simplistic example, but it illustrates the point quite well.

Company #1 is the model used by the government for medicare. Company #2 is the model used by insurance companies. They actually take in less than they pay out most of the time.

So, which one would you pick? The overpriced government model? Obviously not.

Now the government has has tinkered with the insurance company business model with the regulations under Obamacare. They must accept new customers with pre-existing conditions, pay certain procedures at 100%, instead of having a co-pay and they have numerous other government mandates.

The pre-existing exclusions were not in place to maximize profits, rather to hold down costs. Now the existing customers will have to pay for sick people being added to the mix. This will increase the cost per customer, and force higher premiums. Same with the no deductible mandates. These simply increase the cost for everyone. We all pay more.

And consider what the insurance companies do with the profits. They invest some in newer technologies, perhaps people and buildings. They pay taxes. And they pay dividends. These dividends mostly get reinvested in other businesses, creating more jobs and perpetuating the motion of the economy.

Obama’s aversion to “corporate greed” actually serves to halt the continuity of economic motion. Which is why we are seeing mass layoffs and an unprecedented increase in the deficit – and the debt.

The problem is not Corporate Greed. It is Government Stupidity.

About Tom White

Tom is a US Navy Veteran, owns an Insurance Agency and is currently an IT Manager for a Virginia Distributor. He has been published in American Thinker, currently writes for the Richmond Examiner as well as Virginia Right! Blog. Tom lives in Hanover County, Va and is involved in politics at every level and is a Recovering Republican who has finally had enough of the War on Conservatives in progress with the Leadership of the GOP on a National Level.

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Tom White Says:

Nothing is more conservative than a republican wanting to get their majority back. And nothing is more liberal than a republican WITH a majority.

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