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
I worked for an insurance company (actually, two). Firstly, it pays to have good accountants and better actuaries, and secondly they have their own reinsurance.
Can’t go bankrupt if you deny all the claims and then when they fight them you pay for pennies on the dollars to the minimum amount you are legally required to pay out for your coverages.
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.
They would have to actively choose to payout more money than they have in the pool in order to go bankrupt. They always have the choice to pay out less and increase premiums.
Something like 90% of people paying for health insurance barely use it. When we have a small to medium expense we pay for it on top of the premium because – deductible. We support the people who need expensive care. A thank you note would be nice…
You pay a lot and use a little.
They’re basically loan sharks in advance, you’re already paying in instalments before you even know how much you’ll need
I’m a 25 y/o healthy male and I pay $450 for my insurance and my employer pays another $450. I haven’t seen a doctor all year. Basically there are literally hundreds of millions of people that are healthy but have to pay insurance because if I do have to go to the doc or go forbid the ER, I’d have to pay thousands of dollars. In fact I currently pay $450 monthly and I STILL HAVE TO PAY $500 to go to the ER.
So to answer your question, they don’t go broke because they charge a fuck ton more than they pay out since I also forgot to mention they haggle all providers to pay then as little as possible.
Here is just a fun example. I ran into this post immediately after reading yours.
https://www.reddit.com/r/HealthInsurance/s/K5rt89TckP
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