Vast sums pour into insurance from our premiums, employers, state and federal tax dollars, and more.
Yet patients and hospitals are cash-strapped, and many doctors aren’t doing so well, either.
Delayed insurance pay-out to your doctor and hospital impacts patient care in a hundred ways. Staffing/hiring, open hours, paying bills, purchasing supplies, expanding services, financial stability, and public trust are just a few.
Even banks are begging for cash, so I don’t think it’s there.
Yes, our system is prone to waste, fraud, and abuse, but that hardly accounts for it all.
So is insurance sitting on the money, or someone else?
Where is your insurance money?
Dr. Eric Bricker just answered my question, and taught me a couple of new terms.
I’m including his transcript below. His video is just under 11 minutes. If you haven’t heard him before, you’re in for a treat.
Pro tip: don’t increase the speed. He’s already packed the time pretty full!
Insurance Float Explained: What is it? Implications for Health Insurance?
Insurance float is the money an insurance company holds between when it receives premium payments and when it pays out claims.
Insurance companies then invest that float money in bonds, stocks or other investments to earn a return. That investment income contributes toward the insurance company’s profit.
Insurance companies also make underwriting profit from charging premiums in excess of claims and their own internal expenses such as broker commission payments and payroll.
Float is equal to upwards of 2.5X total premiums for Property and Casualty (P&C) insurance companies, 10X for Life insurance companies… but only 0.3X for health insurance companies.
Correction: I should have said $100M to $300M in my health insurance float example, not $10M to $30M.
Accordingly, investment income from float makes up 70% of P&C insurance profit, 90% of life insurance profit… but only 20% of health insurance profit.
Health insurance companies still work to maximize float by prolonging reimbursement to healthcare providers like doctors and hospitals.
For a healthcare provider, the insurance carrier’s float is their Accounts Receivable.
New technology such as AI is unlikely to reduce healthcare provider accounts receivable because delayed payment is not a technology problem, but rather an intentional strategy by health insurance companies to maximize profit.
Sources at AHealthcareZ YouTube Channel.
