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Do non profit health insurance companies exist?

businessman at laptop seeks non profit health insuranceUnbelievably, there are a large number of nonprofit health insurance companies covering millions of Americans across the country. This is despite the fact that insurance companies have been largely portrayed as evil, profit-driven businesses making untold amounts of money off the backs of American workers. Unfortunately, in the ongoing argument over individual health care coverage, the truth about insurance companies is often skewed by both sides.

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Before we go any further, it must be noted that most people misunderstand the term “nonprofit.” According to the Citizen Media Law Project, there is no legal definition for a nonprofit organization. The only guidance the federal government provides is to state that no monies generated by the organization can be used to directly benefit those who control it, outside of normal salary and benefits. A nonprofit must be organized for some purpose other than private enterprise; a purpose that can be deemed as intended for the public good.

How many nonprofit health insurance companies exist?

Most people would be surprised to learn that their health insurance company was a nonprofit organization. For example, a good number of Blue Cross & Blue Shield providers across the country are set up as nonprofits. All of them used to be at one time, but over the years of some have been transformed into profit-making ventures. Nonetheless, insurance companies like Kaiser Permanente, Health Care Service Organization, and Himark, Inc. are among the many nonprofits.

According to statistics provided by The Alliance for Advancing Nonprofit Health Care, more than 60% of the health insurance providers  in America with at least 100,000 subscribers are nonprofit organizations. Furthermore, when you combine all of the nonprofit Blue Cross & Blue Shield organizations across the country, they control nearly 30% of the market.

If so many health insurance companies are nonprofit, why are they turning a profit?

According to federal law, the nonprofit health insurance organization can still make money; it’s just that the profit they make cannot go to the benefit of those who control the company. All profits must be kept inside the organization to be used to further its operations. Nonprofit health insurance companies typically invest their profits in new facilities, hiring new employees, etc. Many also invest in local hospitals and medical clinics that are registered as nonprofit.

While the truth about nonprofits many irk some people, there’s no real way to make an organization work otherwise. Health insurance is such a complicated and convoluted enterprise that it would be nearly impossible to run a health insurance organization without making at least a small profit.

The fact is; health insurance subscribers simply don’t pay enough in premiums to cover the entire cost of their claims. Insurance companies therefore must invest premiums, for profit-making purposes, in order to have enough money to pay all claims.

Proponents of universal health care often decry the fact that nonprofit health insurance companies actually make money. They believe a single-payer system with the government at the helm provides health care for everyone on a truly nonprofit basis. Since the government, by its nature, doesn’t turn a profit on taxpayer dollars, it is relying solely on tax revenues to pay medical bills. Nevertheless, how many of us will contribute enough in tax dollars to pay the full total of our medical claims? The government model just doesn’t work.

Are health care cooperatives organized as nonprofit organizations?

It is safe to say that most healthcare cooperatives are organized as nonprofit organizations. That’s not to say it can’t happen, but that it’s rare to have a cooperative organized as a profit-seeking venture. Cooperatives typically pool the resources of either health care providers or patients as a way to share the burden of medical costs across the board.

Some cooperatives are organized by health care providers who then turn around and offer insurance plans to subscribers. Other times, patients who either contribute on a monthly basis or volunteer to contribute to specific medical bills submitted by other members organize cooperatives.

In either case, cooperatives rely on “charity” from all members in order to meet the needs of the group. Because of this, they’re usually organized as nonprofit organizations. If there’s anything truly nonprofit in the health insurance businessa cooperative is the closest thing.

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