Financial Sustainability of the U.S. Health Insurance Industry

The U.S. health insurance industry appears highly sustainable from a financial perspective. It collects premium revenues in advance, invests reserves, spreads risk over tens of millions of members, and maintains substantial capital surpluses. However, the broader sustainability of the healthcare financing system depends on whether employers, households, taxpayers, Medicare, and Medicaid can continue supporting healthcare costs that have historically grown faster than inflation and wages.

2023 Key Figures
Industry Assets: $1.6 Trillion
Statutory Surplus (Net Worth): $290 Billion
Net Income: $24.8 Billion
Profit Margin: 2.2%

Annual Industry Cash Flow (2023)

Inflows

Source	Amount
Premium Revenue	$1.087 Trillion
Investment Income	$12.8 Billion
Total Major Inflows	≈ $1.10 Trillion

Outflows

Category	Amount
Hospital & Medical Claims	$946.8 Billion
Administrative Expenses	$126.3 Billion
Total Major Operating Outflows	≈ $1.073 Trillion

Annual Net Income: $24.8 Billion

Ten-Year Industry Growth (2014–2023)

Metric	2014	2023	Growth
Net Earned Premiums	$527 Billion	$1.087 Trillion	+106%
Hospital & Medical Expenses	$451 Billion	$947 Billion	+110%
Net Income	$5.7 Billion	$24.8 Billion	+339%

Approximate Decade Totals (2014–2023)

Using reported annual values and trend data, the industry processed roughly:

Category	Approximate Decade Total
Premium Revenue Inflows	$7.5–8.5 Trillion
Medical Claims Payments	$6.5–7.5 Trillion
Administrative Expenses	~$1 Trillion
Cumulative Industry Profits	~$175–200 Billion

Why the Industry Is Financially Sustainable

1. Premiums are collected before claims are paid.
2. Risk is spread across millions of policyholders.
3. Premium rates are adjusted periodically in response to medical inflation.
4. Large reserve funds generate investment income.
5. Regulatory capital requirements provide financial stability.
6. The industry maintains hundreds of billions in accumulated surplus.

The Principal Long-Term Threat

The largest threat is not insurer insolvency. Rather, it is the possibility that healthcare costs may continue rising faster than wages, economic growth, and government revenues. While insurers have generally succeeded in passing higher costs through premiums, deductibles, employer contributions, and public program funding, there may be political and economic limits to how far this trend can continue.

Bottom Line

From a purely financial standpoint, the U.S. health insurance industry is currently sustainable and well-capitalized. Annual inflows exceed one trillion dollars, assets are approximately $1.6 trillion, and the industry earns consistent profits while maintaining substantial reserves.

The broader question is not whether insurers can remain solvent, but whether the overall healthcare financing system can continue absorbing healthcare cost growth over the coming decades.

Assets of the U.S. Private Health Insurance Industry

The U.S. private health insurance industry controls approximately $1.6 trillion in total assets. This figure includes cash, investments, claim reserves, receivables, property, and other financial assets held by commercial health insurers.

Key Figure:
Estimated assets of U.S. health insurers: $1.6 trillion
Estimated statutory surplus (net worth): $290 billion

Major Health Insurer Asset Holdings

Company	Total Assets (Approx.)
UnitedHealth Group	$310 Billion
The Cigna Group	$158 Billion
Elevance Health	$121 Billion
Combined	~$589 Billion

How Industry Assets Are Held

• Cash and cash equivalents
• Short-term investments
• Corporate and government bonds
• Stocks and equity investments
• Premium receivables
• Real estate and mortgage holdings
• Funds reserved for future medical claims
• Other operating and financial assets

Context

The private health insurance industry's approximately $1.6 trillion asset base is large enough to rank among the largest pools of private capital in the U.S. healthcare sector. Investment income generated from these assets supplements premium revenue and contributes to insurer profitability.

Comparison

Sector	Total Assets
Private Health Insurers	~$1.6 Trillion
Entire U.S. Insurance Industry	~$7.4 Trillion
All U.S. Insurance Company Financial Assets	~$15.8 Trillion

Bernie Sanders' Proposals for Social Security (SSA) and Supplemental Security Income (SSI)

Senator Bernie Sanders has generally advocated expanding retirement and disability benefits while strengthening the long-term financing of Social Security. His approach differs from proposals that seek to reduce benefits or raise the retirement age.

At the center of his agenda is the Social Security Expansion Act, legislation designed to increase benefits, improve cost-of-living adjustments, and raise additional revenue from higher-income individuals.

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Social Security (OASDI) Proposals

1. Increase Monthly Benefits

The Social Security Expansion Act would increase benefits by modifying the benefit formula used to calculate monthly retirement and disability payments.

Supporters of the legislation have estimated that the changes could increase benefits by approximately $2,400 per year for many recipients, or about $200 per month.

2. Use the CPI-E for Cost-of-Living Adjustments (COLA)

Sanders proposes replacing the current inflation measure used for Social Security COLAs with the Consumer Price Index for the Elderly (CPI-E).

The CPI-E places greater weight on expenses commonly incurred by older Americans, particularly:

• Health care
• Prescription drugs
• Housing costs

The objective is to provide cost-of-living adjustments that more accurately reflect the expenses faced by seniors.

3. Strengthen Benefits for Low-Income Workers

The legislation would establish a stronger minimum Social Security benefit tied to poverty guidelines for workers with long employment histories but relatively low lifetime earnings.

This provision is intended to help ensure that retirees who worked for decades do not retire into poverty.

4. Increase Revenue from Higher Earners

One of the primary funding mechanisms would apply Social Security payroll taxes to earnings above $250,000.

Under current law, payroll taxes only apply up to an annual wage cap. Sanders argues that higher-income workers should contribute Social Security taxes on income above $250,000, thereby generating additional revenue for the system.

5. Tax Certain Investment Income

The Social Security Expansion Act also proposes increasing revenue through taxes on certain forms of investment income and higher-income taxpayers. These revenues would help strengthen the program's long-term finances.

6. Oppose Raising the Retirement Age

Sanders has consistently opposed proposals to increase the Social Security retirement age.

His position is that Social Security's financial challenges should be addressed through additional revenue rather than through benefit cuts or delayed eligibility.

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Supplemental Security Income (SSI) Proposals

SSI differs from Social Security retirement and disability insurance because it is funded by general federal revenues rather than payroll taxes.

Although the Social Security Expansion Act primarily focuses on Social Security retirement and disability benefits, Sanders has generally supported reforms designed to strengthen SSI.

Key SSI Positions

• Increase SSI benefit levels.
• Modernize and raise SSI asset limits.
• Reduce penalties on beneficiaries who save modest amounts.
• Simplify eligibility rules.
• Strengthen protections for disabled Americans.

These proposals reflect Sanders' broader anti-poverty agenda and his view that SSI program rules have not kept pace with modern economic realities.

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Potential Impact on Medicare and Disability Beneficiaries

For retirees, SSDI recipients, Medicare beneficiaries, and dual-eligible individuals, Sanders' proposals generally aim to expand economic support and reduce financial pressures.

Program	General Direction
Social Security Retirement	Higher monthly benefits
Social Security Disability (SSDI)	Higher benefits and stronger funding
Supplemental Security Income (SSI)	More generous eligibility and benefit rules
Medicare	Expanded benefits under Medicare for All proposals
Out-of-Pocket Medical Costs	Substantially reduced under Medicare for All proposals

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Key Takeaway

Bernie Sanders' approach to Social Security and SSI centers on expanding benefits, increasing protection against inflation, strengthening support for low-income retirees and disabled Americans, and financing those expansions primarily through higher taxes on high-income earnings and certain forms of investment income rather than through benefit reductions or increases in the retirement age.

Illustrative Sanders-Style Federal Budget

Total Annual Federal Spending: $10.0 Trillion

Category	Annual Spending	% of Budget
Universal Health Care (Medicare for All)	$4.5 Trillion	45%
Social Security	$1.8 Trillion	18%
Defense	$800 Billion	8%
Education (Pre-K through College)	$600 Billion	6%
Climate & Infrastructure	$600 Billion	6%
Income Support & Anti-Poverty Programs	$700 Billion	7%
Veterans Programs	$250 Billion	2.5%
Housing Assistance	$250 Billion	2.5%
Federal Debt Interest	$300 Billion	3%
All Other Government Functions	$200 Billion	2%
Total	$10.0 Trillion	100%

Perspectives on Sanders' Social Policy

Determining the overall cost of proposals associated with Senator Bernie Sanders involves breaking down several distinct policy initiatives, as cost estimates vary based on independent economic analyses, implementation timeframes, and specific funding mechanisms.

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Key Program Cost Estimates

• Medicare for All

  Estimated 10-Year Federal Cost: $30 trillion to $34 trillion.

  Details: The single-payer plan eliminates private health insurance premiums, deductibles, and co-pays for individuals. While federal spending increases substantially, overall spending on nationwide healthcare services is projected by some economists to remain comparable or see overall savings by cutting administrative costs and negotiating prescription prices.

• Universal Childcare and Early Childhood Education (Pre-K)

  Estimated 10-Year Federal Cost: ~$1.5 trillion.

  Details: Proposed to provide free, high-quality childcare from infancy through age 3, as well as universal pre-K for 3- and 4-year-olds. Sanders proposed financing this primarily through an expanded wealth tax on high-net-worth households.

• College for All & K-12 Public Education Initiatives

  Estimated 10-Year Federal Cost: ~$2.2 trillion to $3 trillion.

  Details: Covers tuition-free public colleges and universities, cancellation of existing student loan debt, and increased federal funding for K-12 schools (Title I and Special Education/IDEA funding). Proposed funding mechanisms include a Wall Street speculation tax on stock, bond, and derivatives trades.

• Direct Universal Cash Dividends ($12,000 Payout / Universal Basic Income)

  Estimated Annual Federal Cost: ~$4.8 trillion per year (~$48 trillion over 10 years).

  Details: While universal basic income (UBI) or direct cash dividends of $12,000 per family member/household have been advocated by presidential candidates like Andrew Yang, Senator Sanders did not include a recurring $12,000 universal payout as a permanent standing policy in his core legislative platform. Emergency stimulus checks were proposed during crisis relief legislation, but a permanent $12,000 universal cash benefit would add significantly to federal expenditures.

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Proposed Funding Mechanisms

Sanders proposed financing his universal social programs through structural revenue shifts rather than relying entirely on deficit spending:

1. Wealth Taxes: A progressive tax on top wealth brackets starting at 1% on fortunes over $32 million.
2. Wall Street Financial Transaction Taxes: Small levies on stock and bond trades.
3. Payroll & High-Income Taxes: Replacing private household healthcare premiums and employer healthcare contributions with dedicated payroll taxes and higher marginal income tax brackets for top earners.

Understanding the Primary and Secondary Markets for U.S. Treasuries

The U.S. Treasury market consists of two distinct markets:

1. Primary Market – where the U.S. government issues new Treasury securities.
2. Secondary Market – where investors buy and sell previously issued Treasury securities.

The primary market is where Treasuries are born.
The secondary market is where Treasuries live and trade afterward.

Primary Market

The primary market is the U.S. Treasury's auction system. When the federal government needs to raise money, it issues new debt securities through regularly scheduled auctions.

The Treasury issues:

• Treasury Bills (4 to 52 weeks)
• Treasury Notes (2 to 10 years)
• Treasury Bonds (20 and 30 years)
• Treasury Inflation-Protected Securities (TIPS)

Who Participates?

• Individual investors
• Banks
• Brokerages such as Fidelity, Schwab, and Vanguard
• Pension funds
• Mutual funds
• Foreign governments and institutions

Example of a Primary Market Transaction

Suppose the Treasury announces a new 10-year note auction.

• You submit a $10,000 order through Fidelity.
• The Treasury conducts the auction.
• The winning yield is determined.
• You receive a newly issued Treasury note.

Your money goes directly to the U.S. government. This is a primary market transaction.

Key Characteristics of the Primary Market

• The security is newly created.
• You are buying directly from the issuer.
• The issuer is the U.S. Treasury.
• The government receives the proceeds.

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Secondary Market

After Treasury securities have been issued, they begin trading among investors. These transactions occur in the secondary market.

The U.S. Treasury is no longer a party to the transaction. Instead, ownership simply transfers from one investor to another.

Example of a Secondary Market Transaction

Three months after purchasing a Treasury note, you decide to sell it.

• You place a sell order through your brokerage.
• Another investor purchases the note.
• Ownership transfers to the new investor.
• The U.S. Treasury receives no new money.

This is a secondary market transaction.

Key Characteristics of the Secondary Market

• The security already exists.
• The government is not involved in the transaction.
• Prices are determined by market supply and demand.
• Investors may buy at discounts or premiums.

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Why Treasury Prices Change

Treasuries have fixed terms and, in most cases, fixed coupon rates. However, market interest rates constantly change.

As interest rates move, Treasury market prices move in the opposite direction.

When Interest Rates Rise

Suppose you own a Treasury note paying a 3% coupon.

If newly issued Treasuries begin paying 5%, investors will generally prefer the newer higher-yielding securities.

To compensate, the price of your 3% Treasury must fall.

When Interest Rates Fall

Suppose you own a Treasury paying 5%.

If newly issued Treasuries now pay only 3%, your bond becomes more desirable. Investors may be willing to pay more than face value for it.

As a result, its market price may rise above par value.

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Primary Market Versus Secondary Market

Feature	Primary Market	Secondary Market
Seller	U.S. Treasury	Existing Investors
Buyer	Investors	Investors
Security Status	Newly Issued	Previously Issued
Price Determination	Auction Process	Market Trading
Money Goes To	U.S. Government	Current Owner
Trading Frequency	Scheduled Auctions	Continuous Trading

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Where Fidelity Fits In

Buying New-Issue Treasuries

When you purchase Treasuries through an auction, Fidelity generally acts as an intermediary that submits your order into the Treasury auction process.

• You participate in the primary market.
• You receive the auction-determined yield.
• You receive a newly issued Treasury security.

Buying Existing Treasuries

When you purchase an already-issued Treasury, you are participating in the secondary market.

Fidelity may:

• Act as an agent and find a seller.
• Act as principal and sell securities from its own inventory.

This is why brokerage disclosures often state that Fidelity may act as principal in Treasury transactions.

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Why Investors Use the Secondary Market

The secondary market offers flexibility that the auction market cannot provide.

• Immediate purchases
• Immediate sales
• Access to specific maturities
• Opportunities to buy discounted securities
• Opportunities to sell before maturity

Example

Imagine you want to invest in a Treasury with exactly 18 months remaining until maturity.

The Treasury may not currently be issuing an 18-month security. However, the secondary market may offer a previously issued 2-year note that now has 18 months remaining to maturity.

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A Simple Analogy

Primary Market

Buying a brand-new car directly from a manufacturer or dealer.

Secondary Market

Buying the same car from a previous owner in the used-car market.

The vehicle is the same; only the seller and pricing mechanism are different.

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Key Takeaway

The primary market is where the U.S. Treasury creates and sells new securities to investors through auctions. The secondary market is where those securities trade afterward among investors. Whether purchased in the primary or secondary market, Treasury securities remain backed by the full faith and credit of the United States.

What Does It Mean When Fidelity Acts as Principal in a Transaction?

When Fidelity acts as principal, it means Fidelity is not simply serving as your broker. Instead, Fidelity itself may be the buyer or seller on the opposite side of your trade.

This is different from an agency transaction, where Fidelity merely arranges a trade between you and another market participant.

Two Ways a Brokerage Can Handle a Trade

1. Acting as Agent (Broker)

In an agency transaction, Fidelity acts as an intermediary between buyers and sellers.

• You decide to buy a security.
• Fidelity locates another investor willing to sell.
• The trade is executed between the two parties.
• Fidelity typically earns a commission or transaction fee.

In this role, Fidelity does not own the security being traded and simply facilitates the transaction.

2. Acting as Principal (Dealer)

In a principal transaction, Fidelity acts as a dealer rather than an intermediary.

• Fidelity may own the security in its inventory and sell it directly to you.
• Fidelity may purchase the security directly from you for its inventory.
• Fidelity becomes one side of the transaction.

In other words, Fidelity is effectively trading with you rather than merely arranging a trade for you.

Why This Matters

The primary issue is how Fidelity is compensated.

When Fidelity acts as principal, it may earn revenue through a bid-ask spread or markup rather than through a separate commission.

For example:

• Fidelity purchases a bond for $99.
• Fidelity sells the bond to a customer for $100.
• Fidelity earns the $1 difference.

As a result, there may be no separately disclosed commission because the firm's compensation is embedded in the transaction price.

Common Investments Where Principal Trading Occurs

Principal transactions are especially common in fixed-income markets because many securities trade over-the-counter rather than on centralized exchanges.

• Corporate Bonds
• Municipal Bonds
• U.S. Treasury Securities
• Certificates of Deposit (CDs)
• Other Fixed-Income Products

Principal transactions are less common with highly liquid exchange-traded stocks, where trades are typically executed through public exchanges.

Is Acting as Principal Good or Bad?

Acting as principal is not inherently good or bad. It has both benefits and potential conflicts of interest.

Potential Advantages

• Immediate trade execution.
• Access to hard-to-find securities.
• Improved market liquidity.
• Simplified pricing structures.

Potential Concerns

• The firm may profit from the spread.
• The firm's interests are not perfectly aligned with the customer's interests.
• Price comparisons may be more difficult than in a commission-based transaction.

Practical Example

Agency Model

• You wish to purchase a municipal bond.
• Fidelity finds a seller willing to sell at $10,000.
• Fidelity charges a $25 commission.

Total Cost: $10,025

Principal Model

• Fidelity owns the municipal bond.
• Fidelity sells it directly to you for $10,050.
• No separate commission appears on the trade confirmation.

Total Cost: $10,050

In this example, Fidelity's compensation is embedded within the transaction price rather than charged separately.

Key Takeaway

When Fidelity acts as principal, Fidelity becomes the dealer on the other side of your transaction and may profit from the difference between its purchase price and the price at which it sells the security. When Fidelity acts as agent, it simply arranges the trade between you and another market participant.

Understanding whether a brokerage is acting as principal or agent helps investors better evaluate pricing, transaction costs, and potential conflicts of interest.