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Doctors get paid well but the administrative burden is also a large part of the discrepancy. Providers have to spend way too much time negotiating with insurance companies over payments and what will and won't be covered. There's an entire business around denying as many claims as they can get away with. Part of it is inherent in a multi payer system (Germany's public-private system has higher costs than the UK) but there are plenty of aspects to the 'managed care' system, like provider networks and utilization management, that are unique to the US.
Similarly, drug development is notoriously expensive and the costs have to be passed down to the consumer at some point - but the insurance companies are hardly innocent bystanders forced to pass them through. Pharmacy benefit managers are supposed to negotiate reasonable prices/rebates and formularies between drug manufacturers, pharmacies, and insurance companies - but the three largest companies (Optum, Caremark, Express Scripts) managing 80% of all prescriptions are owned by UnitedHealth, CVS, and Cigna, which defeats the whole 'independent negotiator' thing and just makes them rent seekers at consumer/government expense. It also makes it possible to skirt the medical loss ratio rule by shifting profits.
Insurance companies are legally obligated to pay out 80% of premiums. I'm sure there are plenty of cases where they deny claims for bullshit reasons, and this is perhaps even part of their business strategy, but the big picture is that they spend the vast majority of premiums on payment for care.
It's not clear to me what "shifting profits" has to do with this, because the regulation is about how much premium revenue is spent on healthcare rather than anything to do with profits.
Vertically integrated insurance companies can charge themselves more so it looks like patients get more bang for their buck. The PBM (owned by the health insurance company) charges the health insurance company a high price for a drug, increasing "payout" (numerator of the medical loss ratio) while simply shifting revenue internally. The same thing happens with insurance-owned clinics and pharmacies.
https://healthjournalism.org/blog/2025/12/reports-show-health-insurers-skirt-medical-loss-ratio-rules/
Retail pharmaceutical spending accounts for 10% of total health spending. It's not the reason for high costs.
What fraction of healthcare spending goes through insurance owned clinics?
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As I understand it, this is part of the problem: since you're loss ratio is floored at 80%, you don't have a strong incentive to manage costs. There is actually a bit of the opposite one: the higher the costs, the higher the premiums, and the bigger is the base from which you derive profits.
That's certainly true. But that would incentivize insurance companies to pay out more claims.
Insurance companies are probably not sufficiently motivated to play hardball with providers on costs. At the same time, people are getting most of their premiums back even if they don't like how much care they get for those premiums.
People aren't getting most of their premiums back. The healthcare system is getting most of the premiums rather than the insurance system, and it's not showing up as profit, but rather being paid to support the health care bureaucracy.
ETA: And sometimes the same entity is on both sides of the transaction, as @yunyun333 points out.
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