Under the current patchwork of state regulations, insurance companies profits are based, in part, on a flat rate percentage of premiums. If they get 15 percent return on premiums, there is no incentive to lower those premiums, in fact, the reversal is true....increase profits by raising premiums.
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Because of the way health insurance works, insurers haven't been paying much of a penalty for failing to contain costs. Insurers typically keep around 15 to 25 percent of the premiums they collect to cover administrative and marketing costs, plus profit (the exact percentage varies according to state regulations, if any). The rest goes to pay for health care for customers.
http://www.consumerreports.org/healt...h_profit_1.htm
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