Timeline for Why are Group health insurance premiums smaller?
Current License: CC BY-SA 4.0
10 events
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| Apr 4 at 8:37 | comment | added | TheEvilMetal | So rather than the pool of employees being less of a risk than the general public they are less of a risk compared to the members of the general public looking for insurance? Presumably because the members of the general public that are looking for insurance are the ones who are more likely to require insurance to pay out. For some reason. Personally I get insurance as a just-in-case measure, not because I specifically need them at the time. I'd expect that to be the same for most people getting insurance, but it looks like the insurance companies disagree. | |
| Apr 3 at 15:52 | comment | added | Grade 'Eh' Bacon | @TheEvilMetal It's not that the employer convinces the insurer about the average health of its employees [something the company has no ability to report on, and will change from year to year anyway]. It is that adverse selection bias persists as a phenomenon of optional insurance. You can't "convince your insurer you are healthy", except via going through intensive medical exams etc., something that to my understanding is only feasible for higher levels of plans, at which point, it would be a requirement anyway. I concede this is academic understanding only, as I live in Canada. | |
| Apr 3 at 15:50 | comment | added | Grade 'Eh' Bacon | @PeterGreen I don't think that's correct. This is an issue of adverse selection bias, because those who seek insurance out personally [a time consuming costly process], may be more motivated to do so [understanding of their own health condition in a way that may not come across in a simple medical exam or questionaire that would enable the insurer to modify premiums to account for risk]. Because the employer's plan may be at least partially subsidized, some of the headache of admin is taken away, and and the employer may need a certain % of uptake, a broader group of insured people may result. | |
| Apr 3 at 15:45 | comment | added | Grade 'Eh' Bacon | The difference between 'adverse selection phenomenon' and 'larger pooling of risk' is subtle, but I do think it is relevant. Consider in context a discussion of public healthcare: Larger pooling of risks means removing the chance that insurance companies go bankrupt due to a bad claims year [protection against which requires government intervention mandating that insurers properly diversify and reinsure their risk]. Removing the adverse selection phenomenon means you're subsidizing unhealthy people's coverage [government services] with healthy people's [+taxes]. | |
| Apr 3 at 14:54 | comment | added | Grade 'Eh' Bacon | Yes I think this is the more direct answer to the asker's question, because what's really at play here isn't the difference in 'pooling risks', but rather a change to the nature of the actual population of individuals being covered. Realistically if you are someone who 'knows they are more likely to need insurance', then that fact may or may not be information known to the insurer, meaning the insurer may or may not be able to adjust premiums to account for it [like +premiums for smokers, which they would ask you about, and you might be denied a smoking-related claim if you had lied]. | |
| Apr 3 at 13:52 | history | edited | yoozer8 | CC BY-SA 4.0 |
Replaced comment replies with links to referenced answer and comment
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| Apr 3 at 9:56 | comment | added | Peter Green | The reason employees are lower risk is because those with an employer-sponsored insurance plan are less likely to decide to "go without" insurance than those who have to pay out of pocket. So "adverse selection" is less of an issue. | |
| Apr 3 at 9:10 | comment | added | TheEvilMetal | So someone from this specific company is a lower risk than a random person requiring insurance. So that lower risk profile causes the lower premiums. Presumably the reason these employees are seen as lower risk than the general population is because the company has managed to convince the insurance company that this is the case during their negotiations. Am I roughly on the mark there? Is it possible for a random person to make these same arguments to lower their risk profile and insurance premiums? | |
| S Apr 2 at 22:41 | review | First answers | |||
| Apr 3 at 4:48 | |||||
| S Apr 2 at 22:41 | history | answered | Alex Knight | CC BY-SA 4.0 |