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How do insurers make money on drug plans?
(piefed.world)
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this post was submitted on 25 Aug 2025
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Insurance works by aggregating a bunch of people together who don't necessarily need benefits right now, and that makes it so there are funds to cover benefits for those who do need it.
Many people end up paying more than they use over the long run (those executives aren't rich from their own bootstraps), but if you're currently coming out ahead then that's great.
This is also why insurers start publicly losing their shit when insurance sign-up rates start falling for 20-year-olds. Those young folks help pay the bills of the old sickly folks. It’s basically a sort of pyramid scheme where the maintainer of the scheme takes a fairly large cut of the proceeds.
Timing matters too, as insurers keep the money invested. If you're collecting the same in claims that you've paid in premium, they're still profiting.