insurance agency ?

Discussion in 'Healthcare/Insurance/Govt Healthcare' started by sam111, Feb 7, 2012.

  1. sam111
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    sam111 Member

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    I am wondering how insurance companies make money. (I know this may seem like a stupid question )

    But if say somebody wanted to open his own health insurance / property casualty insurance company.

    1)He would first go to town hall or the state to get a small business or corporation paperwork, have a hearing with the board of directories,...etc
    2) after approved ... they would some how have to get funding from somewhere,... bank loans, shareholders ,..etc
    3) after the money and the business title is issued .... then calculate the risks / math on how much he should sell insurance at for each thing he is insuring (based on age , height ,weight ,...other factors ),....etc
    4) after all that you got to make sure you have enough customers to keep your business running.... marketing/advertise his business (in the hope to get enough customers)

    With all this it seems that numbers 3 and 4 would be the most problem / risk areas.
    Since How do they know they will get enough customers and how can they know for sure that their won't be a major problem where the bulk of their customers actually having to use their insurance faster then the customers paying the company income/profits?

    Seems to me their is alot of risk involved.

    In theory you can work out the math so that you know you at least need X many customers paying Y amounts of dollars per year to keep the business running (i.e rental costs per month, utilities , employees payments/salaries , and some profit )

    But I can see away to guarantee even with the math supporting you that it will work out.

    Also if it didn't work out I would be worried about who I owed the money to bank loan , or shareholders,...etc (they would probably want to kill me)
    Maybe somebody that knows more about how to start an insurance company works could elaborate.
    And give me pointers if my business sinks what to do about the owed money how to take care of the damage in the most ethical or best way possible in the event you cann't pay it back.
     
    Last edited: Feb 7, 2012
  2. editec
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    editec Mr. Forgot-it-All

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    Ya think?
     
  3. Greenbeard
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    Greenbeard Gold Member

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    You forgot the part where you assemble a provider network, negotiating the reimbursements you'll be charged for services rendered to your enrollees. Bigger insurers with a larger market share obviously have an advantage here over some upstart, given that they have greater leverage relative to providers in those negotiations (though if the insurer can't meaningfully threaten things like network exclusion, even having a substantial market share might not give it all that much of an upper hand when negotiating with a provider).
     
  4. sam111
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    sam111 Member

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    I thought you are the insurance provider ?
    And the reimbursement stuff would be covered when doing the math in step 3
    copay ,...etc

    Don't fully get what you mean by assemble a provider network and the reimbursements you'll be charged for services rendered to your enrollees?


    Question
    Is it the doctors responsibility to no how much a procedure/particular visit costs.
    Who is responsible for knowing how much a procedure costs?
    Since their has to be away to determine how much a pulled tooth will cost or a reasonable price for it so that insurance companies can base their copays and insurance rates on it.

    The analogy is in construction , the contractor calculates how much it will cost to build a particular house in a certain way. This is based on the raw materials used time taken ,..etc . Then the construction workers start building it using their skills.

    The construction workers are like the doctors of a building
    And the contractors are like the guys that figure out the costs/timing (aka project managers sort of).

    Back interms of medical stuff
    doctors would equal construction workers of the human body
    But who equals contractors (that figure out the cost of a procedure ,...i.e used medical tools ,time , used medication ,.....etc)
    Who sets these prices and how do we know they are fair?
     
    Last edited: Feb 7, 2012
  5. Greenbeard
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    Greenbeard Gold Member

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    Your questions are interrelated. The amount a procedure costs the provider to offer it isn't necessarily closely related to the price that provider charges, nor is there a set price for a given procedure or service at a given institution. Different payers will pay different rates because those rates are generally determined in a negotiation between the insurer and the provider. When it comes to individual physicians or small practices, an insurer might use what's called the resource-based relative value scale to organize what it's paying for but the actual numbers it reimburses may very.

    For hospital services in particular, the system is a bit maddening. If you want to know how the prices that hospitals charge for services are determined, I'd recommend reading "The Pricing Of U.S. Hospital Services: Chaos Behind A Veil Of Secrecy ":

    That annual negotiation between insurer and each hospital in its service area is what I was referring to above. How much a procedure costs any one of those hospitals depends in large part on how much the provider can wring out of the insurer (and that number will vary between the insurers that hospital does business with).
     
  6. sam111
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    sam111 Member

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    Ok, I will look thru your links... interesting to know.

    Ok maybe your links will clear this up but I have to ask the price that the insurance people charge per year would be based on how much the procedure cost to some extent as well as age , other biological risk factors.

    I was just wondering who is responsible for creating the approx. price for a procedure at a particular hospital or office. Is it the doctors (I would think they would be to busy to keep track of this)

    Like say you didn't have insurance then how much would it cost if you broke your finger and had to go to a doctor. What would be an average price range to expect to pay out of pocket.... as well as what happens if it was more serious say broken arm ,...etc

    Their most be somebody responsible for coming up with how much a procedure cost regardless of the insurance company for that particular office.

    Based on raw hospital materials needed , doctors time , medication ,equipment ...etc
    Who sets these prices if you don't go thru an health insurance agency
     
    Last edited: Feb 7, 2012
  7. Greenbeard
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    Greenbeard Gold Member

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    The price (reimbursement) is created in the interaction with the insurer. Which is why a given procedure will have a different price based on who happens to be paying for it. Those reimbursements can and do change for a given provider based on the relative balance of power between the provider and a given insurer. See this older thread for an example: Payer and Provider Do Battle in Texas .

    And we do indeed have an extremely administratively complex system for exactly that reason.

    There's evidence--out of California, at least--that if you're uninsured you'll pay something similar to Medicare rates, which are lower than commercial rates.

    Read the link in my post above about hospital pricing, particularly the bit about the hospital chargemaster.
     
  8. sam111
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    sam111 Member

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    Ahh I see how it works.
    chargemaster list is the same as I am talking about a raw material cost list...etc

    question
    Then a health insurance or third party company must have access to all the chargemaster for each hospital they support / allow you to go to. If they don't have the chargemaster then do they just increase their prices to whatever they feel fit to survive and profit?

    Seems to me insurance companies need the chargemaster to make a reasonable approx. to how much they should set their insurance rates for different procedures ,...etc .

    I am a math major and with out all the calculations for things it would seem to me impossible to approx.

    How was it done before chargemaster ? Because I cann't see hospitals with out them since if they didn't have one... then asking how much something cost to them wouldn't make since. And then course insurance companies wouldn't make since...etc
     
    Last edited: Feb 7, 2012

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