The health insurance companies are paid as a percentage of the amount of care that flows through them. So healthier customers means their profit is 5% of SMALLER_NUMBER.
> So healthier customers means their profit is 5% of SMALLER_NUMBER.
I don't think this is completely true right? Rather, it's more accurate to say that customers that are seen as healthier get to pay less premiums, but customers that are seen as unhealthy have to pay more.
In both scenarios, you, as the insurance company, still want to be minimizing the amount of care you actually pay for.
In other words, to maximize profits, it seems like the best customer is one that's high risk (high premiums), but less likely to require a catastrophic payout. In which case, it feels like an obese high risk patient on ozempic seems like a pretty solid deal.
My understanding is that under ACA their profit is capped and if they don't pay out they have to issue rebates:
> In the simplest terms, the 80/20 rule requires that insurance companies spend at least 80 percent of the premiums they collect on medical claims, effectively capping their profit margins. If insurers fall under this threshold, they must rebate the difference to policyholders.
So that would mean that the only way to increase the profit is to reduce over head and keep more of the 20% or increase the amount of claims. Paying out less in claims would mean they have to give rebates back to the customers.
As with everything health care related I'm sure it's more complicated than that and I'm missing something. For instance my health care plan is through my employer so everyone pays the same premium and the provider doesn't get to set it based on how healthy each employee is (although certainly the whole group is negotiated when the contract comes up for renewal).
