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> The insurance company saved money, but did Amazon? I thought the portion of premiums that employers pay is fixed? Large companies actually underwrite their o

> The insurance company saved money, but did Amazon? I thought the portion of premiums that employers pay is fixed? Large companies actually underwrite their own plans (this is known as self-insuring[0]). The plan is managed by a known insurance company (e.g. Aetna, Blue Cross), so from the employee's perspective it's the same, but the actual risk is borne by the company. I would be very surprised if Amazon did not do this, given their size (~200K employees) and company age (over 20 years). As a rule of thumb, the break-even point is about 1000 lives covered. Once a company gets to that point, it starts to be in their best interest to underwrite the insurance plans they provide. Source: Founded a health-tech company that sold to insurers (which meant selling to companies that self-funded their plans as well, as they were they real risk-bearing entity). [0] https://en.wikipedia.org/wiki/Self-funded_health_care https://en.wikipedia.org/wiki/Self-funded_health_care

sjg007 11y ago
Yes but a self insured company should also buy catastrophic reinsurance that covers high claims cases.
- chimeracoder 11y ago
  Reinsurance doesn't completely let the company off the hook for the costs (in the long run). Even if reinsurance covers 100% of costs above the cap (which it typically does not), those costs will just get factored into the future premiums charged to the company[0] . It makes it hard to place an exact price tag on how much this employee's coverage would have cost the company without knowing the details, but it's clear that it would have been very expensive to them one way or the other - and certainly a lot more than it cost them to have her switch to her husband's insurance instead. [0] It's just like how your renter's insurance rates will [often] skyrocket immediately if you try to file any claim at all. People aren't used to this in the consumer health insurance market because there's a lot of indirection in the healthcare system, but that's how all insurance models work at a high level[1], so that's how the costs all (eventually) flow (extra emphasis on "eventually"). [1] There's also the added wrinkle that we also use "health insurance" as a political tool to do things that have nothing to do with risk smoothing at all, so the model gets tricky to unpack, but that's a separate matter.
  - sib 11y ago
    While I agree with your comment overall, this "It's just like how your renter's insurance rates will skyrocket immediately if you try to file any claim at all" is not true in all cases. I filed what turned out to be a $10K claim for theft against renter's insurance, on a policy that I had only had for about 3 years. The claim was paid in full, with no pushback, even though I did not have receipts for all of the items stolen, and there was absolutely zero increase in premium. The policy has been renewed twice since then, again, without premium increase.
ohitsdom 11y ago
Thanks, good info!
javajosh 11y ago
It's interesting to consider why it's ~1000 and not some other number like 100 or 10,000. It's probably a combination of irreducible information complexity (a system for adding/removing people, processing premiums, investigating claims, paying providers probably costs too much for 100 people) and statistical risk (100 people are chaotic, whereas 1000 people are relatively smooth).

sjg007 11y ago

Yes but a self insured company should also buy catastrophic reinsurance that covers high claims cases.

chimeracoder 11y ago
Reinsurance doesn't completely let the company off the hook for the costs (in the long run). Even if reinsurance covers 100% of costs above the cap (which it typically does not), those costs will just get factored into the future premiums charged to the company[0] . It makes it hard to place an exact price tag on how much this employee's coverage would have cost the company without knowing the details, but it's clear that it would have been very expensive to them one way or the other - and certainly a lot more than it cost them to have her switch to her husband's insurance instead. [0] It's just like how your renter's insurance rates will [often] skyrocket immediately if you try to file any claim at all. People aren't used to this in the consumer health insurance market because there's a lot of indirection in the healthcare system, but that's how all insurance models work at a high level[1], so that's how the costs all (eventually) flow (extra emphasis on "eventually"). [1] There's also the added wrinkle that we also use "health insurance" as a political tool to do things that have nothing to do with risk smoothing at all, so the model gets tricky to unpack, but that's a separate matter.
- sib 11y ago
  While I agree with your comment overall, this "It's just like how your renter's insurance rates will skyrocket immediately if you try to file any claim at all" is not true in all cases. I filed what turned out to be a $10K claim for theft against renter's insurance, on a policy that I had only had for about 3 years. The claim was paid in full, with no pushback, even though I did not have receipts for all of the items stolen, and there was absolutely zero increase in premium. The policy has been renewed twice since then, again, without premium increase.

ohitsdom 11y ago

Thanks, good info!

javajosh 11y ago

It's interesting to consider why it's ~1000 and not some other number like 100 or 10,000. It's probably a combination of irreducible information complexity (a system for adding/removing people, processing premiums, investigating claims, paying providers probably costs too much for 100 people) and statistical risk (100 people are chaotic, whereas 1000 people are relatively smooth).