Why are medical insurance companies able to get huge discounts but individuals cannot?

Question

Is this a two pricing system that would be illegal discrimination, maybe even an antitrust violation.???

Answer 1

Lowhart,

It appears that you have no idea on how Health Insurance works. I will try to explain it in simple terms so you can understand a little more about how the world and it's inner working components.

Health Insurance is sold at a premium (annual fee), where millions of members contribute funds monthly, bi-annually or annually. The insurance companies then invest the money within multiple strategies, thus increasing the value of it's assets (cash). In return, the Insurance company will pay for a majority of your basic medical expenses.

A good example would be, if you have a $50 co-pay option for an Emergency room visit, you are obligated to pay $50 of the total bill. A typical Emergency room bill for a non-traumatic visit is about $2,000.00, which means that you pay $50 and the insurance company pays $1,950.00. The insurance companies can afford to float this, because the longer they keep you alive, the more money you'll spend in premiums. Ultimately, the money they make in investments and premiums, vs. what they pay out is substantially more.

If you don't have insurance, then you would be obligated to pay the full $2,000 for the emergency room visit. So you can see, that there is no discount being applied, it's just a question of whose responsible for paying and how much.

You can apply the same logic to prescription drugs, dental cleanings, car insurance, etc.

Answer 2

Medical insurance companies do not get discounts. They negotiate contracts with hospitals, doctors etc..Basically the contract gives the hospital or doctor a different maximum amounts that they will be paid for different services that they provide. In exchange for signing these contracts the hospital or doctor gets put on a preferred list that gets sent to all of the members of the insurance company, which increases the hospital or doctors business.

Individuals can't get contracts because the doctor or hospital would not profit from making a deal with one person. Now, if you got a big group of people who all went to the same doctor maybe you could make a deal with that doctor.

No, it's not a two pricing system or antitrust because insurance companies compete against each other all the time for hospitals and doctors to sign one contract or the other. It's not discrimination because no one race,creed,religion..etc gets to benefit from these contracts.

here's an example

doctor's bill
120.00

Insurance contract max pmt 80.00
your copay $20.00
insurance company pays doctor $80.00
doctor's office has to write off other $20.00



hope this helps

Answer 3

there are some great answers. Another way is they can drive business to specific type of medical facilities as well and because they do this, can get a type of discounts for the large quantity of people.

Answer 4

Because they buy a boat from China full of bandaids and you only buy one at your local Wal-Mart.

If you want cheaper bandaids you have to go to China.

Answer 5

Simply put...money talks

Answer 6

economies of scales

Answer 7

try ameriplan - i have it - it's pretty good if you can't get something through your job
good luck