Originally Posted by BigCatDaddy
Do you know how I know you have no idea how insurance companies work?
The goal of an insurance company it to break even on on their underwriting losses. Essentially to take in the same amount on premiums that's paid out in claims. How they make their money is investing the money from the premiums they take it and earn money on that before they have to pay it out in claims. They are essentially borrowing money at a 0% clip and if they happen to make a 2-3% profit on the insurance side that's is pretty damn good.
So when insurance companies are forced to pay out more money guess what? They need to take in more money from those already paying the premiums, it doesn't come out of the insurance companies pockets at all because they can't afford to do that without raising addition funds.
So as you see it's just robbing Peter to pay Paul.
No, raising premiums wouldnt solve their problem in your example, it would only exacerbate it, since it means more premiums not spent on health costs. Only cutting administrative costs (as a share of total costs) can solve the problem. I dont think you understand the 80% rule.