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
It’s a protection racket. The insurers negotiate a cost with providers, hospitals, pharmaceutical companies, etc. That is NOT the cost you’d be charged if you’re uninsured. Say, for example, an emergency appendectomy after rupture for uninsured would be charged 100K, but the negotiated price is 30K. Plus, depending on the level of coverage you buy, you’d still be likely to have cover 20% co-insurance of that.
And, it’s an insurance company. They get plenty of money every month for healthy people who won’t need much of anything. That’s usually the majority of paying customers. The insurance company will take that money and invest it, earning interest.
EDIT: Americans who worked long enough get government run health care (Medicare) at 65. So the most expensive patients aren’t actually on private insurance. This minimizes risk to their bottom line.
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