Can small health insurance companies provide adequate coverage?
When it comes to providing adequate health care coverage small insurance companies can provide plans every bit as good as their larger competitors. That’s because it’s not about the size of the insurance company; it’s about the health. As long as premiums are being invested wisely to maximize returns, there’s no reason why a small health insurance company can’t provide adequate coverage.
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Like any other form of insurance, health insurance operates by collecting premiums from subscribers, investing those premiums, and then using the proceeds to pay claims that are made against it. The key to an individual insurance company’s health lies in the quality of its investments as compared to its ability to control costs. A healthy insurance company realizes a good return on investments while keeping losses as minimal as possible.
How do smaller health insurance companies compete?
A good way to remain competitive in the health insurance field is to offer group coverage to employers, business trade organizations, and other groups of individuals. By offering group coverage, an insurance company is able to charge lower premiums while at the same time spreading the cost of health care across the entire group. Every member of the group shares the collective burden of medical costs through monthly premiums.
By offering group coverage health insurance, providers are guaranteed a certain number of subscribers which, in turn, helps them better control their finances. Assuming that that majority of group members will be relatively healthy also ensures that payment on claims is as low as possible. The group model is perhaps the best model for smaller insurance companies with limited resources.
What types of coverage do small insurance companies offer?
The types of coverage offered by small health insurance companies are determined solely by their business model and resources. Typically, the three most common forms will be a:
- High deductible HMO/PPO
- Low deductible HMO/PPO
- Major medical policy
According to definitions provided by the Centers for Disease Control a high health insurance deductible HMO (health maintenance organization) or PPO (preferred provider organization) is one with annual deductibles of no less than the $1,100 for a single subscriber and $2,200 for a family. Conversely, low deductible plans have lower annual numbers.
In terms of major medical, such policies are standard across the board in that they are designed to provide coverage for major medical issues like:
- Heart attacks
- Cancer treatments
- Injuries sustained in a car accident
The amounts of coverage these policies provide depend on the preferences selected by the subscriber. Like HMOs and PPOs, there are annual deductibles and coverage limits. These policies also tend to be less expensive because they do not cover routine care.
Is a small insurance company required to offer coverage to any employer or group that wants it?
According to federal law, a health insurance company of any size must offer group coverage to all employers in a given region if it offers it to just one. In other words, insurance companies cannot provide care for one employer yet disqualify another. Furthermore, all coverage options offered to one employee must be offered to all of them. Just as insurance companies cannot exclude employer groups, they also cannot exclude individuals or groups of employees.
If individuals can not be excluded, why do so many Americans lack health insurance?
Individuals who lack health insurance are usually in that position for one of three reasons:
- Their employers don’t offer it and they can afford it
- They make too little to purchase their own insurance and too much to qualify for government programs
- They simply choose not to purchase health insurance
The simple fact is that even though insurance companies offering group coverage cannot exclude individuals, there are plenty of individuals who refuse health care coverage for one reason or another. In fact, in a 2009 article published by the American Spectator cited a study from Blue Cross & Blue Shield that revealed the actual number of people without health insurance on a long-term basis was about 8.2 million in 2003. That is very different from the 46 million often cited by proponents of universal health care.
The study quoted in the American Spectator took the total number of uninsured individuals and subtracted out those who are choosing not to be insured (even though they can afford it), those who are living in the country illegally, and those who qualify for government programs yet have failed to apply for them. The fact is there are other options available to all three groups that they are simply not availing themselves off. That leaves us with a very small number of people who legitimately don’t have insurance.
Whether you’re looking for a large insurance company or a small one, you can see side-by-side health insurance quotes online when you enter your zip code below.