How are insurance companies not bankrupt form people going to the hospital because of Covid
In: Economics
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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