What is a Risk Pool? Health insurance risk pools are special programs created by state legislatures to provide a safety net for the "medically uninsurable" population. These are people who have been denied health insurance coverage because of a pre-existing health condition, or who can only access private coverage that is restricted or has extremely high rates.
In insurance, the term "risk pooling" refers to the spreading of financial risks evenly among a large number of contributors to the program.
Insurance is the transference of risks from individuals or corporations who cannot bear a possible unplanned financial catastrophe to the capital markets, which can bear them easily — at least in theory. The capital markets, meanwhile, are generally happy to take on risk from individuals and corporations Risk pool in exchange for a premium they believe is sufficient to cover the risk.
History of Risk Pooling Risk pooling is essential to the concept of insurance. The earliest known insurance policies were written some 5, years ago, to protect shippers against the loss of their cargo and crews at sea.
Any one of them would be devastated by the loss of a ship. But by pooling their resources, these ancient businessmen were able to spread the risks more evenly among their numbers, so each paid a relatively small amount. Under the Babylonians, those receiving a loan to fund a shipment would pay an additional amount in exchange for a rider cancelling the loan if a shipment should be lost at sea.
Modern Insurance Policies The insurance industry grew enormously, as individuals and businesses sought to protect themselves from economic catastrophe by transferring their risks to an insurance pool.
We still have commercial shipping insurance — just as we did in the ancient world — and we also insure against such diverse risks as fires, floods, theft, auto accidents, kidnap and ransom schemes, defaults on the part of our debtors, lawsuits and judgments, dying too early and even against the risk of living too long.
Risk and Premium A class of professional experts in finance and probability, called actuaries, work for insurance companies to attempt to predict the probability and severity of risk.
They also take lapse rates and interest rates or other expected rates of return on investment assets into account, with the goal of setting acceptable premiums. If a premium payer is affected by a covered risk, the insurance company, and not the insured, takes the hit.
If claims are higher than expected, however, the insurance company may have to raise rates on policy holders across the board. Uninsurable Risks Not every negative economic event is insurable. For risk pooling to be effective, the risk should be unforeseen and infrequent.
Furthermore, if a risk is too frequent, it cannot meaningfully be transferred to an insurance company, since the insurance company would only pass on the cost of the negative occurrence to the pool of insureds, along with their expenses and profits.
If nearly everyone in a risk pool is filing a claim, then they are likely better off not attempting to pool their risks at all but setting aside sufficient reserves to pay for them themselves.Now that the consumer protections in the ACA have been fully implemented, risk pools are no longer necessary the way they were in the past.
Health insurance applications are no longer denied because of medical history, and people are no longer offered policies with increased premiums or exclusions based on pre-existing conditions. The Risk Pool by Richard Russo A wonderfully funny, perceptive novel The Risk Pool is set in Mohawk, New York, where Ned Hall is doing his best to grow up, even though neither of his estranged parents can properly be called adult/5(44).
High-Risk Pool Plan (State) Similar to the Pre-Existing Condition Insurance Plan under the Affordable Care Act, for years many states have offered plans that provide coverage if you have been locked out of the individual insurance market because of a pre-existing condition.
The Risk Pool is a thirty-year journey through the lives of Sam Hall, a small-town gambling hellraiser, and his watchful, introspective son Ned. When Ned's mother Jenny suffers a breakdown and retreats from her husband's carelessness into a dream world, 4/5.
Home > Obamacare > Health insurance and high-risk pools. Health insurance and high-risk pools ACA's coverage of pre-existing conditions made high-risk pools obsolete. Will they be resurrected as an Obamacare replacement?
Although larger risk pools are typically more stable, a large risk pool does not necessarily mean lower premiums. The key factor is the average health care costs of the enrollees included in the pool.