Consider CVS Health which owns Aetna (an insurer), Caremark (a PBM) and CVS (a pharmacy). Aetna is required to spend 80% on premiums whereas Caremark and CVS face no such constraints on their profit margins.
There's a reason why there's so much M&A in this space while consumers are simultaneously facing higher premiums.
United health at 6%
https://finance.yahoo.com/quote/UNH/key-statistics/
Similarly, Anthem at 4.22%, CVS at 3%, Cigna at 3.38%, Humana at 5.58%, Molina at 4.57%, Centene at 2.12%.
The reason there’s so much M&A in this space is because there’s no margins, so it’s either go big and win in economies of scale, or go home and go out of business. And people face higher premiums because more people are getting more access to healthcare. There’s no lifetime benefit maximums or pre existing condition exclusions anymore. And the highest premiums are capped at 3x the lowest premiums.
Net income is a poor metric here. It includes acquisition costs (and interest paid on debts for said acquisitions).
https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...
I don’t see a lot of juice to squeeze in insurance companies in general.
The 5% that you quote is after those acquisitions (and taxes) and is not a true indicator of profit.
All the insurers have profit margins in the 3% to 5% range. Where is all this extra profit that the middlemen are making?
Even if the PBM division is earning more profit than others, it's simply offsetting losses elsewhere.