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An insurance company can be more profitable if their customer base is more healthy (less payouts) then their competitors. Society wide health improvement schem
by positr0n 9y ago
An insurance company can be more profitable if their customer base is more healthy (less payouts) then their competitors.
Society wide health improvement schemes like this generally hurt insurance company's profits since their profit and administrative overhead costs are capped to a percentage of the cost of their insurance plans[0]. One of the problems with healthcare in the US is that not many of the players are incentivized to improve costs. Industry wide inefficiency just means the insurance industry's 3% (or whatever) profit margin is larger in absolute terms.
[0]: https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-...
- awakeasleep 9y agoDo you know how that works? If a statistical fluke or some sort of weird event caused far fewer people to file claims, but the insurance company is already collecting the money from employers and planholders, what would happen?
- spiznnx 9y agoIf its a fluke, they make short term profits. If you adopt a new policy that makes health insurance cheaper to provide in the long run, your competitors will force your prices down to that new price, lowering your profits.
- positr0n 9y agoIf they make too much profit they have to pay back the extra in the form of a rebate (according to the link I provided).