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Comment by unprepare | Hacker News Reader

profit/cost centers as i understand them are internal parts of an organization.

its uncommon to say an entire organization is a cost/profit center; instead you would say x department is a cost/profit center.

FWIW, i believe most insurance companies make their money from investing the insurance premiums - i would say within an insurance company the finance department is likely the profit center, and whichever department handles payouts to healthcare providers would be seen as a cost center for the org.

oh it may be worth adding- most major US insurance companies are run as non-profit organizations.

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Yes but in this context it's important to distinguish between something which is purely run at a cost with only budgets determined by politicians and then something which is turning a profit and can use that to invest.

Another way to put it is that companies have both cost and profit centers, public healthcare systems like the one in Denmark only have a cost center.

I am not sure what this seems so controversial.

This IS the big difference between a system which is purely run by tax money and don't take any revenue and then one which do.

Private insurers make their money by providing less care per dollar. They cannot raise rates arbitrarily (or if they can, it indicates they have no competition and there's no free market at play) and they cannot reduce the cost of care significantly. The best way for an insurance company to make more money is to simply make fewer payouts. i.e. Reduce the cost center.

Every dollar a private insurer makes (or invests) is a dollar they didn't spend on care for their clients. If you assume that insurers have, say, a 5 percent margin, the fastest way to cut the cost of care by 5% is to eliminate the profit.

An insurance company can get more companies as customers and there can be more companies created.

You are getting way to hung up on the internal details of how it works.

Insurance companies are one part of the healthcare package. There is a reason it's a business which can do well or not so well.

Thats very different than a public healthcare system where EVERYTHING is budgeted.

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