Hi, I’m from the UK, the healthcare industry in the US has always confused me but one thing I can’t seem to get my head around is how the insurance companies don’t go bankrupt.
I understand how insurance companies work in the fact that they accurately calculate premiums and invest the money whilst not receiving more claims than premiums.
However, in the healthcare industry wouldn’t they receive many claims on a regular basis? Especially from people who require medication on a regular basis e.g Insulin
Furthermore, with hospitals bills and medication being so expensive will they not payout more in bills than they receive in premiums from people?
In: Economics
So here’s the thing about insurances companies. They don’t pay anywhere NEAR the market price of medical products and services. Sometimes it’s like 10% of what the cash price would’ve been. Someone I know had a hospital stay where the “bill” was $150,000k. The price that the insurance company actually ended up paying the hospital was less than 20k. So the cost of healthcare isn’t actually as high as the sticker prices make it seem. It’s just that cash payers get gouged with 1000% markups compared to the actual cost. Insurance companies have huge leverage to negotiate with hospitals because of their buying power. But like all insurance they are still reliant on a relatively high pool of people who don’t use the insurance often.
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