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Politics : Formerly About Advanced Micro Devices
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To: Tenchusatsu who wrote (833086)1/28/2015 9:26:13 PM
From: combjelly  Read Replies (2) of 1579234
 
No. For an individual all they have are the probabilities that you will need this procedure or that medication. The larger the pool, the closer the match is to what they have to pay for. The smaller the pool, the higher the risk that they didn't cover the risk properly. The higher the risk the more they have to charge to cover that risk.

Since it is just probability, let's use a simple model. A coin flip. The odds of a head or tail is 50/50. If we are looking at small number of flips it is not very predictable. Say six flips in a row of heads. But as the number of flips increases those runs get evened out by runs in the other direction and the actual number of heads and the actual number of tails converge. Large populations are more predictable than small ones. To cover the risen that an individual or small group will need something expensive, they need to charge more. With a large enough group, those needs become more predictable and the lower risk means they can charge less.

Which is why employer provided health insurance is such a lousy idea. Because the population is divided into a huge number of pools, it means there is higher risk. That pushes up the cost of the insurance.

It really isn't a difficult concept.
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