Possible Collapse in Health Insurance Companies?
Before I begin, I just want to say that this is just an idea that struck my head earlier today and I wanted to see what everyone's opinion is on it? I may be off by a long shot since I haven't gathered much facts yet but this is what I thought of it.
Health insurance companies determine the premium that the charge to everyone based on the average cost of the person who costs them the least (healthy individuals "Group A"), and those who cost them the most (unhealthy individuals "Group B"). If that's the case, it is only inevitable that Group A will eventually realize they are paying too much for insurance since they do not make the most out of it and more of individuals from Group B will subscribe to the insurance because they are getting the better end of it. Eventually, all of Group A will cancel their insurance and be left with Group B. Now we divided Group B into Group C (unhealthy) and Group D (very unhealthy). With Group A gone, the insurance companies will have to average their premium price that they charge between Group C and D, thus raising it. Sooner or later, Group C will face what Group A faced, the premium will be too high for their wallet and will end up cancelling their insurance. Leaving Group D an even higher premium price. And this can go on and on. If this was to be the case, wouldn't health insurance companies collapsed a long time ago?
What prevented it was the health benefits provided by major employers such as GM, Ford, Microsoft, and etc. Since the employee has no choice as to whether or not they want to cancel or subscribe to an insurance, individuals ranging from Group A to Group D has no control over it. With that, health insurance companies were able to keep individuals from Group A to lower their average costs. Everything so far has been hypothetical and I have to research more to validate it.
IF it was to be true, then a collapse in health insurance companies would be likely. With the massive layoff from giant companies and an ever increasing unemployment rate, we are looking at health insurance companies losing Group A individuals as they are being laid off and no longer part of the company providing the health benefit. Eventually all group A will be gone, then Group C, and etc.
On top of all this, we are going to be seeing some major depression. People would be scrambling to find money to put food on their table (worst case scenario). In addition, healthy food costs MORE compared to a less healthier selection. People with not a lot of money to spend will have diet consisting more of a less healthy food.
I will report back soon after I get some facts straight to see if I can make something of this. Meanwhile, any comments?