Re:The one HR benefit every startup should add
by mcherm on Monday August 26, 2013 @02:28PM
(#6278897)
> Why should it be cheaper to have group policies through employers? The entire freaking point of the insurance company is that they are pooling money from a bunch of people over time in the form of premiums to be able to distribute to a minority who need it in emergencies.
Good question. The answer is that the insurance companies know that people are self-selecting if they buy insurance on their own, while (to a good approximation) they do not select jobs on the basis of the insurance that they will get from it. So insurance offered through an employer comes from a pool of typical people with a certain age and wealth distribution, while insurance sold directly to consumers comes from a pool of people who think that they need that particular kind of insurance. Needless to say, the risk is MUCH higher with the individual policies, and it is priced accordingly.
Good question. The answer is that the insurance companies know that people are self-selecting if they buy insurance on their own, while (to a good approximation) they do not select jobs on the basis of the insurance that they will get from it. So insurance offered through an employer comes from a pool of typical people with a certain age and wealth distribution, while insurance sold directly to consumers comes from a pool of people who think that they need that particular kind of insurance. Needless to say, the risk is MUCH higher with the individual policies, and it is priced accordingly.