Unconscionable Math -- Taunter Media
This article explains why--in this case--.5% is HUGE.
In a nutshell, very few people (5% or so) require treatments that cost more than they've paid in. 95% of the insured, therefore, and extremely profitable. 4% (or thereabouts) are in the break-even territory for the insurers. And of the 1% who really, really need health insurance roughly half of them get abandoned and left to die.
This, of course, is not what insurance is supposed to do. It's supposed to leverage the cheapness of covering the 99% of us to pay for the 1% that get cancer.
Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.
An individual adult insurance plan is roughly $7,000 (varies dramatically by age and somewhat by sex and location).
It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn’t make a lot of sense for the insurance company to take the nuclear option of blowing up the policy. $11,487 in claims is less than two years’ premium; less than one if the individual has family coverage in the $12,000 price range. But that top one percent, the folks responsible for more than $35,000 of costs – sometimes far, far more – well there, ladies and gentlemen, is where the money comes in. Once an insurance company knows that Sally has breast cancer, it has already seen the goat; it knows it wants nothing to do with Sally.