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Possible Collapse in Health Insurance Companies?

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March 07, 2009 – Comments (5)

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? 

5 Comments – Post Your Own

#1) On March 07, 2009 at 5:58 AM, dwot (97.58) wrote:

I have said before that I do not see any point in paying for health insurance.  Premiums paid are not set aside for future services and they are essentially insolvent in terms of the future health care commitments they already owe people.

Take the money you would pay into health insurance and put it into a separate savings account...

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#2) On March 07, 2009 at 11:39 AM, columbia1 wrote:

Dwot, you hit the nail straight onto the head. Being self-employed since 1992, we have been putting $500 a month in the bank to cover our medical cost. I pay all my cost out of pocket and at a discount for paying at the time of service and we are way ahead of were we would be, paying $1200/Mo. for insurance. That $1200/Mo. policy only covered 80% of the bills and we were responsible for the first $8000 a year. Things got even better when Wal-mart started its prescription program, now my Cholesterol pills are only $6/Mo. That and the fact I am able to choose what every Docter I want.

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#3) On March 07, 2009 at 12:41 PM, percodan (< 20) wrote:

There is just one very small problem with this common thinking,without the insurance companies or somebody with a better plan than you guys (no offense) just where would you go to get this medical treatment and medications. As easy as it is to cuss the insurance companies they are the ones that pay for these medical facalities to be in business. Unfortunately a lot of people would have medical bills that would far exceed the savings even if you saved the entire $1200. What happens if every one follows your advice?What happens to those whos savings pool ends? You are betting with the odds stacked way against you. You can believe that insurance companies are like the house in Vegas they have all the odds figured out. I agree some reform is needed to the insurance companies. They are not so far a government subsidized business and are in business for a profit. We either need a national health program or a major over haul of the expenses that we as well as insurance companies have to pay. Somebody has to pay . Mr Shff has hit the nail not you guys. Sorry just my opinion

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#4) On March 07, 2009 at 1:41 PM, columbia1 wrote:

percodan- In July of 2007 I suffered a major attack of pancreatitis, would up in critical condition for 72 hours and spent a total of 8 days in the Hospital. The resulting bill was $52,000. If I would of had health insurance, the first $8000 would have to be paid by me, then 20% of the reminder, close to another $10,000. For a total of close to $20,000. I ended up settling with the hospital for $25.000 (and change), and paid the doctors and labs close to $6,000. This may not work for everybody, but benefited me since I was saving for over 15 years. Actually this is the first time I have set down and figured the difference for quite some time. If I had been paying health insurance for 15 years, that would of cost me $216,000 just for the premiums. At the most I have spent no more then $45,000 out of pocket including dental and eye care in that time. I would like to have insurance. The one type of insurance I would like to see would be a catastrophe insurance that would cover any cost above $100,000, 100% with affordable premiums, right now there are none offered in my state.- I am self-employed and my choices are really limited.

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#5) On March 08, 2009 at 2:57 PM, percodan (< 20) wrote:

Columbia1

I did not mean to sound like  I was ridiculing you in any way. I do not mean to argue your plan .Just disagree with all savings as a plan for everybody.However you seem to be one of a very few number of people who think that saving is better that do the savings and you do it well and follow through. Not many people do that but only talk the game. Looking at the figures you give I can understand now why you are in favor of the savings plan for you. It has been good to you so far. As you probably guessed I was in insurance for years and it was not health it was fire and causualty but the principals of insurance are the same. In concept you spead the risk out among the many to protect the ones who need  help . Although you have had big success so far the biggest majority of the catstrophic bills come at older ages .The odds are against you but you may be one of that lucky group who win the game or beat the odds. It happens even in Vegas.  That is  why i said insurance companies have all the odds figured out. They are like the casino, they know more will loose than win. You have been very lucky so far but our recent financial collapse shows that things can turn around 360 degrees in a matter of months. One day you are ahead through very carefully planned and disiplined savings and the next you are all but bankrupt if not bankrupt.  You are correct that we need some major help and you do what  you can. You have to feed your family and take care of living . You cant spend every dime covering every thing that might happen to you by spending all your money on premiums.. I like your thinking in that we need a combination of both to live in the high cost world of health coverage. A savings plan with maybe a tax break in addition some kind of catastophic plan you could buy. I do that myself in a way. I take the highest deductibles I can and save to cover the high deductibles and I too come out ahead on my wife and kids but not me. The only problem with our plan as a universal plan is so many people are not as disiplined in saving and keeping that money in savings. Who knows what is right but I have paid like you over $1200 a month for insurance but have had 6 back surgeries along with many many very expensive test and xrays etc. If I had relied on saving plan only I would be  on the streets.  I am retired on disability now and last year my medical insurance and my deductibles and copay and medication ran me over $28000 and I have medicare and a supplement. Insurance premiums including drugs was $8600. Even with insurance I lost .The best plan of all plans is for our government to get its heads out of their butt and work as a team to save this country or we all will have no health coverage.

You mentioned you wanted a catostrophic policy. Now you are on  tract for the perfect plan for you and those who like the savings plan by having both you have the best of plans. You have protection and the possiblilty of having additional money at the same time.

I was lucky enough to have both just like you would like. I wish both of us the best. Sorry if i was disresptful to you I am just an ex salesman and I always worried about my clients if they were not protected and old habits are hard to break. Believe it or not

there were some of us that really care. This was my opinion only not meant to ridicule any one elses opinion. Good luck on finding a catastropic plan. The internet has a lot of plans with as much as a $5000 ded and are by respectful companies but I did not research all the information. 

One last thing. Insurance companies sell a daily benefit policy. I use to take a very high deductible to save the premium and then  buy a $100 or $200 daily benefit policy that helped me pay the high deductibles. Buying these two combinations high deductile with a daily benefit still saved me lots of money before I had the money to save.

I dont even know why I got envolved I almost never ever post replies to anything I read but somehow this caught my eye and both my post  were only to help if I could.

 

        

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