alt Hacker NewsI believe they are saying that only the portion of premiums paid by UHG customers _that are not_ spent on paying out claims should be counted as UHG revenue. That is if I and my employer pay UHG $18,000 over the course of the year and UHG pays out $2,500 to my doctors and to cover my prescriptions, only the remaining $15,500 should be counted as UHG revenue.
The thinking here is that because UHG is legally obligated to pay out claims, this money only "passes through" their hands. I believe the legal obligation is the thing here.
Anyway, if these pass through costs (the claims they are legally obligated to pay) are removed from the equation then their revenue number is smaller and their profit margin is larger.
Replies
> if I…pay UHG $18,000 and… UHG pays out $2,500…, only the remaining $15,500 should be counted as UHG revenue
To illustrate the problem with this, what would you calculate their revenue to be if you become severely ill and they pay out $100,000?
There is no such concept in accounting as negative gross revenue. And situations where net revenue goes negative are exceedingly rare and complex (you’d probably hear about it in the news and someone might end up in jail).
Not sure I'm buying it tbh. I'm no fan of the American healthcare system, but we don't need to invent new accounting to make it look worse than it is.
Lots of businesses and industries have legal obligations to pay money for various things at various times, they don't treat that as pass through...it's revenue and expenses. Money is fungible.