Help Educate Me On Health Insurance Companies (1 Viewer)

[chet]

My friend asked me to get involved in a potential purchase of a small healthcare insurance company.  I don't know a lot about the business and would like to come up to speed quickly. 

The company provides health care coverage to companies and individuals in a rural area.  They negotiate coverage with providers where there's often only one doctor.  Anyone here know about the key drivers in this business?  TIA

 

[IC FBGCav]

Collect more in premiums than you pay in care.   But actually @matttyl is the biggest honk for insurance companies on the board.   He could help you.

 

[El Floppo]

as long as you stick it to the end-user, you should be all gravy.

 

[Bucky86]

Insure more healthy people than sick people. If somebody does become sick, find a loophole to avoid paying as much as possible. Profit.

 

[matttyl]

Collect more in premiums than you pay in care.   But actually @matttyl is the biggest honk for insurance companies on the board.   He could help you.

I'm an agent, so not sure I'd call myself a honk for the insurance companies.  Thanks for thinking of me, though.

 

[matttyl]

My friend asked me to get involved in a potential purchase of a small healthcare insurance company.  I don't know a lot about the business and would like to come up to speed quickly. 

The company provides health care coverage to companies and individuals in a rural area.  They negotiate coverage with providers where there's often only one doctor.  Anyone here know about the key drivers in this business?  TIA

Personally, I'd steer clear.  If it's small, it doesn't really take much to really throw things out of whack quickly.  One or two people with higher than expected costs (in the millions) would really throw off the balance.  Just how small are you talking here?

 

[chet]

Personally, I'd steer clear.  If it's small, it doesn't really take much to really throw things out of whack quickly.  One or two people with higher than expected costs (in the millions) would really throw off the balance.  Just how small are you talking here?

I don't know exactly but they cover 25 counties.  I should be getting a due diligence package in the next week or two. 

What are some key numbers or ratios to look at?

 

[Thorpe]

Personally, I'd steer clear.  If it's small, it doesn't really take much to really throw things out of whack quickly.  One or two people with higher than expected costs (in the millions) would really throw off the balance.  Just how small are you talking here?

They would have reinsurance for cases like this. 

 

[matttyl]

They would have reinsurance for cases like this.

Which has a cost....which would go up if those situations continue over time.  The margins in this industry aren't what people think they are.

 

[matttyl]

I don't know exactly but they cover 25 counties.  I should be getting a due diligence package in the next week or two. 

What are some key numbers or ratios to look at?

Not really the side of the business that I deal with, sorry.  I just know that the margins in this industry are around 3% these days - and with all the red tape already in the industry (and likely growing with each passing month with this administration), you'd really need to do your homework.

 

[RokNRole]

They are evil POS's

That pretty much covers it.

 

[Foosball God]

Is it a CO-OP?

 

[chet]

Is it a CO-OP?

I believe it is but they will convert it to a for profit if they buy it.

 

[Foosball God]

I'd probably steer away at the moment.  Lots of volitility in healthcare right now.

 

[joffer]

Apparently they're in it for the money.

 

[Mrs. Rannous]

If you know so little about the business that you have to ask basic questions, the answer in no.  Don't invest in things you know nothing about.  Research is your friend.

 

[James Daulton]

Slim margins.  Tell your friend to buy a pharmaceutical or medical device company if they want to make big money in healthcare. 

 

[Grace Under Pressure]

I don't know exactly but they cover 25 counties.  I should be getting a due diligence package in the next week or two. 

What are some key numbers or ratios to look at?

Loss Ratio = Premiums - (Claims + Admin Fees). This is your typical insurance measurement, compare their recent history to industry loss ratios. Have an actuary analyze their book. Older and sicker populations, or those moving in that direction, are "book of business' to avoid".

 

[Short Corner]

Slim margins combined with the high variance can be costly.  If you do it you definitely need to use a re-insurer.