Personally I find it very interesting that a $20 restaurant meal might only be netting $1 to the owner. Makes me feel like going out isn’t actually that bad of a deal.
Well, in point of fact, the limit is actually a mandate on how much they must spend on medical care. Their own operating expenses, salaries, advertising, et c., have to come out after that. So they could theoretically make 15% under that limit—except in practice that's actually impossible. Which means margins aren't necessarily 5% because of competition.
[EDIT] That is, I'm skeptical that if one removed that limit, competition would keep margins where they are. Forcing all profit to come out of 15% of revenue probably does play a major role in keeping the actual margin as low as it is.
The fact that they settle for sub 5% profit margins means they individually do not have the pricing power to do that. Clearly, a competing insurance company will steal business via lower premiums.
I suppose one could assert they are all in cahoots and have a secret deal to accept low single digit profit margins to keep out of the news cycle, while simultaneously agreeing to pay healthcare providers more and more each year, but I would want proof.
