Non-Profit Insurers: A Cheaper Alternative?

When I discovered the existence of non-profit* insurance companies, I was hopeful. I thought “surely a company that isn’t hell-bent on making a profit will provide more affordable policies and handle claims with fairness and decency.” Unfortunately, I was wrong.

Due to the nature of the insurance markets, non-profit insurers have been forced to mirror the activities of their for-profit cousins, which had the effect of either 1) putting them out of business because you can’t do both at once or 2) turning them into for-profit companies that find legal loopholes that allow them to still be labeled as “non-profit.”

The Starving Goddess Livilla – Wasting Away, Just Like Non-Profit Insurers (credit:  Wikipedia)

Some That are Labelled as Non-Profit are Gaming the System

Blue Shield of California lost its California tax exempt status in 2015 because although it was classified as non-profit, it was not adhering to the charitable nature we all expect of a true non-profit organization. Instead, it was holding all $2 billion of its profit in a large fund that was intended to be used to expand the company further. There are numerous non-profit insurance companies like Blue Shield that are just not subject to the same level of scrutiny as they would be in the California pro-consumer environment.

The True Non-Profit Insurance Companies Have Gone Out of Business**

When Obamacare failed to offer the public option, i.e. government provided medical care, they did manage to keep a non-profit or “CO-OP” option available. For these co-ops to succeed against the massive, already well-established insurance companies, they needed a great deal of government support and funding right from the start. The co-ops started out very well and even had premium rates that were 6-9% cheaper than the for-profits. However, as the years went by, the U.S. government did not follow through on its promise to provide a certain level of funding, and the non-profits simply were not able to survive.

*Insurance companies that run as a non-profit institution.

** At least most of them have – I don’t have data on ALL of the companies that were created under Obamacare.

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