A Model For A Non-Profit Health Insurance Company

Health insurance heart above hand

Image Credit: Shutterstock

(Note: This post is quite similar to one I wrote a couple of weeks ago.)

Here’s a rough sketch for a non-profit medical insurance company:

  1. First of all, it’s a non-profit company, so it wouldn’t have to pay taxes or show a profit.
  2. It would be funded by policy sales (premiums) and tax-deductible donations. The usual sorts of fund-raising campaigns would be used to attract donors.
  3. The finance and actuarial side would work more-or-less exactly like it does in the for-profit insurance industry, but policy pricing wouldn’t include profits.
  4. One of the company’s core principles would be exactly the same “presumption of innocence” doctrine that grounds the U.S. Justice System: a claim is assumed to be legitimate and must be proven otherwise. This means that all claims are paid immediately, given that certain application standards are met. Let me put it a different way: provided that certain minimum application standards are met (e.g. doctor’s prescription) no claim would be denied! Yup, that’s what I said. Perhaps the company’s slogan would be something like: “we pay first, and ask questions later.” This would be a very attractive feature and make the product highly competitive in the market, provided the premiums could be kept affordable.
  5. To protect against fraud, claims would be randomly sampled and audited, which is to say scrutinized from top to bottom for evidence of fraud. If evidence of fraud is found, formal charges would be filed with the appropriate authorities. The company might also offer cash rewards for evidence that leads to the conviction of people who file fraudulent claims.

That’s about it.

What do you think?

2 Comments

  1. A not-for-profit health insurance company would be a very good start. The problem with for-profit health insurance companies is that their first and primary focus is towards their share holders when the first and foremost focus should be customer service. An health insurance company by definition should seen as a service provider.
    It’s not surprising that many insurance companies (at least in Canada) have re-branded themselves as financial institutions. (EG. Manulife Financial, Sunlife Financial etc.) Albeit that do handle a lot of money but their primary purpose is not the handling of money but helping their clients by paying for the services that the client had contracted with them.
    It should stand to reason, that if there are no shareholders to placate, a large percentage of the funds collected will not longer go to satisfy the shareholders, resulting in more money available for necessary treatment for clients.

    In Canada the idea of a cooperative is well known. You could explore the idea of setting up a health insurance company that is modeled on a cooperative model. Cooperatives can be either not for profit or profit sharing for all clients. Their premiums would be the basis of their vested interest in the health cooperative.

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