Having a health insurance policy that kicks in when you need it is one of the biggest blessings one can hope for in the present economic climate. With our overall health taking a hit due to questionable lifestyle choices and the sheer stress of the times we live in, health insurance has become the need of the hour. But have you ever wondered how health insurers are able to manage the business of health insurance and deliver their promises in our hour of need? It is because of the concept of risk pooling. Here’s a deep dive into risk pooling and how it impacts health insurance.
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At any given time, a wide demographic of people is enrolled in health insurance plans. This usually should be a fair mix of low- and high-risk persons. It is a combination of the young and the old, the healthy and the sick. They effectively form a pool with the health insurance premiums they pay, and it can be dipped into to address the needs of the individuals in the pool when the time comes. Chances are that not everyone from this pool will need health insurance to step up for them all the time, depending on the diversity of the pool. Risk pooling effectively allows the insurers to address the problems of the high-risk individuals from the pool. This will include the elderly and those with chronic conditions. The healthy individuals can also rest assured that their needs will be addressed as and when they arise.
The health insurance industry survives and thrives due to risk pooling. Here are some of the best plans that use risk pooling to ensure coverage reaches policyholders in their hour of need.
Corporate insurance is nothing but the group insurance that is linked to your employment and is provided by the employer. This is the perfect example of how risk pooling works. The pool here is made up of a diverse set of employees spanning all age groups and with varying levels of health. So the risk is spread across the group, and this leads to lower premiums even for employees who are at high risk.
Government-funded health insurance schemes are essentially risk-pooled to the hilt. They protect the vulnerable from the funds that come in via a large number of taxpayers and subsidies. The risk is spread across most of the population, and this allows care to reach those who need it the most at very cost-effective rates. It helps with the effective budgeting and delivery of healthcare to all the citizens of the country. Examples of government-funded insurance schemes in India are Ayushman Bharat and PM-JAY.
Insurance premiums are very expensive for the elderly and those who are more prone to hospitalisation than others. Risk pooling lowers the premium in such cases, as the risk is spread across a mix of high-risk and low-risk policyholders. It stabilises premiums across the board, which in turn leads to more predictable premiums for all.
Risk pooling also provides access to healthcare to those who need it the most. Without risk pooling, the cost of medical care for high-risk individuals will be exorbitant, and this may stop them from seeking medical attention. Risk pooling lowers their expenses and allows them to live a life of quality and dignity.
Often, the odds are stacked against the poor, the elderly, and those with chronic and life-threatening diseases when it comes to healthcare and insurance. With risk pooling, the healthcare needs of the vulnerable sections of society can be addressed and protected.
Risk pooling helps insurers stabilise and sustain their business. It helps protect them against the rising cost of addressing the medical needs of high-risk individuals. When the risk is spread across a diverse demographic, the insurance companies can protect their interests. This, in turn, helps them serve their policyholders better and keep their best interests in mind.
Risk pooling is the basic tenet on which the entire health insurance business is based. It benefits both the policyholders and the insurance companies. Without it, we will be looking at inflated premiums and less access to life-saving medical care. And no one wants that.
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Reviewed by Dr. Harshita Dahiya 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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