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
No one has said the actual answer yet.
#1 they do go bankrupt/loose money, discontinue products etc. But one thing you might not know is that insurance companies have insurance. It’s called re-insurance. There are even bigger companies that insure the insurance companies. If they loose or go broke, these reinsurance companies pay.
#2 they have Actuaries that run very complex calculations to determine what the premiums will be for certain groups. These are usually very accurate and rarely loose money if everything is done correctly.
Latest Answers