In this chapter we will take a look at all the different “types” of insurers and how they are structured. The following are the different types of insurers:
Traditional Insurers
Domestic, Foreign and Alien Companies
Blue Cross/Blue Shield
Health Maintenance Organizations (HMO)
Preferred Provider Organizations (PPO)
Traditional Insurers
This type of company is one that has evolved over time into a ‘branded” image in the eyes of the public. This is the opposite of what we have come to know in today’s world as Health Maintenance (HMO) and Preferred Provider Organizations (PPO).
A traditional insurer selling health coverage may specialize in just health coverage. The types of insurance they sell may be referred to as accident and health (A&H) or accident and sickness (A&S) companies. Most states require a separate license to write life, health and property casualty.
Stock and Mutual. Not only can an insurance company be categorized by the type of insurance, they can also be considered in terms of its ownership as either a stock or mutual company.
At the time of organization, a stock company sells stock to raise the money necessary to operate a business. The stockholders are not necessarily insured by the company nor do policyholders necessarily own stock in the company. It is in business solely for the purpose of selling insurance to policyholders.
On the other hand, with a mutual company the policyholders are also owners of the company and as such, can vote to elect the company management. Any monies beyond the operating costs of the company may be returned to the policyholders as dividends or reductions in future premiums.
Consumer Cooperatives. There are two different types of cooperatives. They are consumer cooperatives and producer cooperatives. Producer cooperatives include companies like Blue Cross/Blue shield and some Health Maintenance Organizations which we will discuss further on.
Additionally, there are two types of consumer cooperatives. One is the mutual insurance model discussed previously and the other less common and unincorporated type is a reciprocal company.
A reciprocal company is based on the model of give and take. Members agree to share insurance responsibilities among all members.
Traditional Insurers
Domestic, Foreign and Alien Companies
Blue Cross/Blue Shield
Health Maintenance Organizations (HMO)
Preferred Provider Organizations (PPO)
Traditional Insurers
This type of company is one that has evolved over time into a ‘branded” image in the eyes of the public. This is the opposite of what we have come to know in today’s world as Health Maintenance (HMO) and Preferred Provider Organizations (PPO).
A traditional insurer selling health coverage may specialize in just health coverage. The types of insurance they sell may be referred to as accident and health (A&H) or accident and sickness (A&S) companies. Most states require a separate license to write life, health and property casualty.
Stock and Mutual. Not only can an insurance company be categorized by the type of insurance, they can also be considered in terms of its ownership as either a stock or mutual company.
At the time of organization, a stock company sells stock to raise the money necessary to operate a business. The stockholders are not necessarily insured by the company nor do policyholders necessarily own stock in the company. It is in business solely for the purpose of selling insurance to policyholders.
On the other hand, with a mutual company the policyholders are also owners of the company and as such, can vote to elect the company management. Any monies beyond the operating costs of the company may be returned to the policyholders as dividends or reductions in future premiums.
Consumer Cooperatives. There are two different types of cooperatives. They are consumer cooperatives and producer cooperatives. Producer cooperatives include companies like Blue Cross/Blue shield and some Health Maintenance Organizations which we will discuss further on.
Additionally, there are two types of consumer cooperatives. One is the mutual insurance model discussed previously and the other less common and unincorporated type is a reciprocal company.
A reciprocal company is based on the model of give and take. Members agree to share insurance responsibilities among all members.
All members insure one another and share in the losses and no member can buy insurance without committing to providing insurance in return. This type of consumer cooperative is managed by an attorney-in-fact who handles all matters of business for the cooperative.
Participating and Non-participating Policies. These terms indicate that the policyholder of a traditional type of insurance, either does or does not participate in, or receive, a share of any surplus that results from an insurers business operations. These terms are also known as par and non-par.
The surplus from which participating policyholders might receive a return are excess reserves for claims, interest on investments and savings on expenses. This represents amounts not ear marked for any particular purpose and are therefore available to participating policy owners.
Domestic, Foreign and Alien Companies
Here in the United States, companies are usually organized and chartered under the laws of one particular state and it is common for them to do business in many states. A company that operates its home office in the state where it is organized is known in that state as a domestic company. In any other states where they do business the company is considered a foreign company. If the home office of a company is located outside the United States, it is considered an alien company. No matter whether it is domestic, foreign or alien a company must be registered in every state in which they operate.
Blue Cross/Blue Shield
These service organizations represent producers cooperatives. Hospitals and physicians who sponsor Blue Cross/Blue Shield plans are providing the insurance, therefore they are considered to be the producers of the cooperative.
Originally Blue Cross and Blue shield were separate voluntary and tax-exempt associations. Blue Cross provided payments to hospitals and Blue Shield covered physicians, medical and surgical fees. People originally covered under these plans were traditionally known as subscribers since Blue Cross and Blue shield differ from traditional insurance companies.
In most states, the two have merged, but each group still covers the expenses for which they were initially created. Over the years the tax advantages they originally enjoyed have deteriorated and many states have removed their exempt status. Additionally the federal Tax Reform Act of 1986 now makes them taxable as insurance companies.
Participating and Non-participating Policies. These terms indicate that the policyholder of a traditional type of insurance, either does or does not participate in, or receive, a share of any surplus that results from an insurers business operations. These terms are also known as par and non-par.
The surplus from which participating policyholders might receive a return are excess reserves for claims, interest on investments and savings on expenses. This represents amounts not ear marked for any particular purpose and are therefore available to participating policy owners.
Domestic, Foreign and Alien Companies
Here in the United States, companies are usually organized and chartered under the laws of one particular state and it is common for them to do business in many states. A company that operates its home office in the state where it is organized is known in that state as a domestic company. In any other states where they do business the company is considered a foreign company. If the home office of a company is located outside the United States, it is considered an alien company. No matter whether it is domestic, foreign or alien a company must be registered in every state in which they operate.
Blue Cross/Blue Shield
These service organizations represent producers cooperatives. Hospitals and physicians who sponsor Blue Cross/Blue Shield plans are providing the insurance, therefore they are considered to be the producers of the cooperative.
Originally Blue Cross and Blue shield were separate voluntary and tax-exempt associations. Blue Cross provided payments to hospitals and Blue Shield covered physicians, medical and surgical fees. People originally covered under these plans were traditionally known as subscribers since Blue Cross and Blue shield differ from traditional insurance companies.
In most states, the two have merged, but each group still covers the expenses for which they were initially created. Over the years the tax advantages they originally enjoyed have deteriorated and many states have removed their exempt status. Additionally the federal Tax Reform Act of 1986 now makes them taxable as insurance companies.
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