mbrcatz
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The average health insurer, right now, pays out $.99 for every $1 taken in, in claims. Additionally, a private health insurer pays out about $.20 for every premium dollar taken in, in administrative costs (electricity, postage, paper, rent, salaries, benefits, insurace for their employees, etc).
So, right now, expenses are about $1.19 for every $1 they take in. The difference is made up, by investment income on the reserves (the float).
How much lower, can you lower the rate, before you go out of business? Any private insurer can, of course, lower the rate as much as they want. And non-profit or not-for-profit companies, that STILL doesn't mean they can pay out more than they take in, and still make payroll!
So, if you lower premiums far enough, then yes, you can't keep high enough reserves to pay future claims, and the state insurance department which regulates you, the insurance company, will shut you down as being financially unsound.
If you charge a lower premium for high risk people than the other companies, then you'll get an unfair percentage of high risk (read, higher claims than average) clients. This is called adverse selection, and means you will be drastically less profitable than other insurance companies writing that kind of business. And, for the record, insurance companies aren't very profitable to start with - I don't buy their stock, AT ALL.
Your solution is underwriting the new clients. Well, that's already being done! So it's not a new solution.
Look at it this way, using the automobile industry as an example.
What is stopping an automobile manufacturer, private or non-profit, from lowering the cost of automobiles significantly?
Different product, same basic reason - product cost to the retailer, has to exceed the wholesale product cost, because no company can operate at a loss indefinately. Except the US government, which has an unlimited supply of income (through raising taxes). |
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