PHI 101: Getting a Balanced Mix of Sick and Healthy Members Is Important

Scale

Called "Risk Spreading"

Why is risk spreading important?

 

  • Equity

  • Efficiency

  • Security

 

If health insurance works the way it should, it pools many people together to share (or spread) the costs (or risk) generated by a small number of people.

Over the long run, risk pooling makes sense because almost everybody, eventually, needs expensive health care. It’s more manageable to pay an average amount (or premium) every month than to get hit all at once by medical bills that reach tens or hundreds of thousands of dollars.

 

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