It's a bad one.
Controlling medical expenses isn't easy. Neither is getting admin + overhead under 10%. You need both to get a reasonably profitable insurance product.
Controlling medical expenses isn't easy. Neither is getting admin + overhead under 10%. You need both to get a reasonably profitable insurance product.
If you assume it costs the health care providers the same amount to file a claim as it takes to process it, then the total overhead of having the insurance industry jumps up to > 30%.
I’ve heard the US numbers are comparable to that, but it is nice to be able to derive it from first principles.
Interestingly, this analysis suggests that the cost of filing a claim should be paid by insurance, not the customer.
Currently the cost is an externality for the insurance company, so they can waste time with nonsensical revisions and rejections before finally paying out.
If the insurance company had to pay for the paperwork on both sides of the process, they’d have a strong incentive to streamline claims.