How Do Health Insurance Companies Make Money? 
Health insurance companies make money by charging more in premiums than the pay out in claims . The company has to project claims expenses 12 months into the future when setting premium rates . Most plans change premium rates only once per year . The Affordable Care Act requires that insurers spend 80 % to 85 % of premium dollars on direct medical care . If the ratio falls below that figure then the difference must be refunded to policyholders . 