How Much Profit Is Too Much?

Today at lunch with two friends I heard the comment that insurance companies want too great of a profit. The other person nodded her head in agreement, adding that no one needs to earn 25 million dollars.

Actually there is a law limiting such profits: http://thehealthcareblog.com/blog/2012/02/04/does-obamacare-limit-profits-for-health-insurance-companies-in-your-state/

And, actually, I’m suspicious that this law actually benefits the consumer.

Suppose one wants to go into the insurance business. Would they be more apt to choose a business where the profits were unlimited, or limited?

Competition drives down prices. Companies are drawn to sectors where they can have higher profits. But to get those profits, they need to be efficient and good.

One of my friends said that her insurance company wouldn’t let her go to MD Anderson, where her specialist worked. If this were a profitable industry, another company would hear of this disservice and jump into the field.

Do we care more about the profits, or do we care about the service and the price?