Financial viability of insurance companies
Financial stability and strength of the insurance company should be a major consideration when purchasing an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool with less attractive payouts for losses). A number of independent rating agencies, such as Best's, provide information and rate the financial viability of insurance companies.
Insurance companies explain the economics of insurance by saying that, in general, if many sick people buy health insurance from a private health insurance company, but few healthy people buy it, the price of the insurance rises. (Critics of private health insurance point out that few sick people are allowed to buy health insurance). Insurance companies also say that if more healthy people buy health insurance, but few sick people buy it, the price drops. In other words, the price drops if more money goes in and less is paid out.
According to the latest United States Census Bureau figures, approximately 85% of Americans have health insurance. Approximately 60% obtain health insurance through their place of Search Insurance Providers by Zip Code Here!or as individuals, and various government agencies provide health insurance to 25% of Americans.
Because of advances in medicine and medical technology, medical treatment is more expensive, and people in developed countries are living longer. The population of those countries is aging, and a larger group of senior citizens requires more medical care than a young healthier population. (A similar rise in costs is evident in Social Security in the United States.) These factors cause an increase in the price of health insurance.
Some other factors that cause an increase in health insurance prices are health related: insufficient exercise; unhealthy food choices; a shortage of doctors in impoverished or rural areas; excessive alcohol use, smoking, street drugs, obesity, among some parts of the population; and the modern sedentary lifestyle of the middle classes.
In theory, people could lower health insurance prices by doing the opposite of the above; that is, by exercising, eating healthy food, avoiding addictive substances, etc. Healthier lifestyles protect the body from disease, and with fewer diseases, the insurance companies would pay fewer doctor bills.
Under these circumstances, consumer would hope to benefit from the savings; however, critics of private health insurance claim that too much of the insurance premiums are paid out in executive salaries or retained as profits by the company.
Before buying health insurance, a person typically fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, and has the person ever been treated for any of a long list of diseases. Applicants can get discounts if they do not smoke and live a healthy lifestyle, which might encourage some people to quit smoking or make other improvements in their lifestyle. The medical history is also used to screen out persons with pre-existing medical conditions.
