What does the term "sick pool" mean in the context of health insurance?

The term "sick pool" refers to a group of policyholders with a higher likelihood of requiring medical care. In health insurance, this concept is critical to understanding risk management and underwriting practices. Insurers use risk pools to categorize policyholders based on their health status and the expected frequency and cost of claims.

When a group is described as a "sick pool," it indicates that the individuals within that group are more likely to utilize medical services, which can lead to higher overall claims costs for the insurer. This situation can result from various factors like chronic illnesses, age, or other health indicators prevalent within that group.

This understanding informs how insurers set premiums and manage the risks associated with covering different populations. Insurers must carefully balance the pool by attracting healthier individuals to offset the costs incurred by higher-risk policyholders. The presence of a sick pool can impact overall insurance strategies significantly, including pricing, coverage options, and the sustainability of health plans.