How are insurance companies not bankrupt form people going to the hospital because of Covid
In: Economics
actual odds of going to the hospital for Covid were very never got above 2% (in the US) (total, no more than 0.05% were in hospital at any given time). Thats pretty small from an insurance standpoint
A lot of the people hospitalized for COVID were seniors on Medicare. Insurance companies likely saw fewer claims for other medical procedures/treatment because people didn’t want to go to the hospital if at all possible, because people had fewer other illnesses from lockdowns, fewer sports injuries, etc. And much of the COVID care was reimbursed by the government. Even so, many insurance companies raised premiums in subsequent years to make back the added expenditures.
Insurance companies purchase reinsurance to protect themselves from catastrophic losses on a policy or set of policies. Furthermore, insurance companies have solvency requirements that assure that even under adverse scenarios (IE 1/200 year stress tests) they still have enough capital to cover their losses.
Insurance companies generally write or assume many lines of business. A large loss on disease and increase in mortality would actually be beneficial to a long term care or annuity block of business. Diversification is huge for an insurance company and drastically lowers their capital requirement.
In the case of COVID, gov paid a significant share of the medical bills which offset some of the cost to the insurance companies as well as lost revenue for hospitals. Also, young people didn’t get sick from COVID, it was generally the elderly who are on Medicare.
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