Re:Just How Profitable Are Healthcare Insurers?
by evgen on Tuesday March 09, 2010 @12:39AM
(#1177617)
Recessions are bad for health insurers, because when people get fired, young and healthy people tend to drop their insurance while those who are older stay on the plan (with COBRA).
It is also the case that insurance companies invest a large portion of their premiums in short and medium term investments; few are allowed to get so fragile that they are in danger of having cash flow problems due to some small fraction of the policyholders shifting the cost basis. When the market tanks they have less income from investments and must cut costs (e.g. deny coverage) and increase income (e.g. raise premiums.)
Try graphing DJIA, unemployment rates, and insurance premiums and see when changes in the first two lines best match increases in average premiums...
It is also the case that insurance companies invest a large portion of their premiums in short and medium term investments; few are allowed to get so fragile that they are in danger of having cash flow problems due to some small fraction of the policyholders shifting the cost basis. When the market tanks they have less income from investments and must cut costs (e.g. deny coverage) and increase income (e.g. raise premiums.)
Try graphing DJIA, unemployment rates, and insurance premiums and see when changes in the first two lines best match increases in average premiums...