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
Profit. Plain and simple.
Let’s simplify the numbers to make it easier.
Let’s say you have 100 people paying insurance each month.
Insurance cost $10 a month.
In one year they’ve paid $12,000.
In that one year, one of them has medical expenses equalling $500.
12,000 – 500 = 7,000
The insurance company made $7000 profit.
This doesn’t account for deductables or co-pays but it gets things going.
It also doesn’t account for the denied claims or for the fact the insurance company won’t be paying the same price as listed on the bill.
Now, consider that insurance companies have hundreds of thousands, or millions of customers and add in those deductables of 10s of thousands of dollars and you can see how profitable insurance is.
Bankruptcy isn’t a concern.
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