Choosing a health insurance provider isn’t just about coverage; it’s about financial stability. Learn how to assess whether your insurer can pay claims when you need them most. I learned the hard way why a health insurance company’s financial strength matters. A few years ago, my aunt was midway through chemotherapy when her insurer, a regional provider we’d trusted for decades, was placed under state supervision. Suddenly, her medical team started asking for upfront payments. Bills that should have been covered were denied with vague explanations. The stress of fighting with administrators while undergoing treatment was almost as brutal as the cancer itself. That experience taught me what most people don’t realize: the fine print of your policy means nothing if the company behind it lacks the financial backbone to honor its promises. 

Financial strength in health insurance isn’t about stock prices or profit margins, it’s about claims-paying ability. When you’re choosing a provider, you’re essentially betting that this company will still be solvent years from now when you develop diabetes, need surgery, or face a serious diagnosis. I’ve spent months talking to insurance regulators, financial analysts, and even former insurance executives to understand how ordinary people can assess this critical factor. 

Start with independent rating agencies. Firms like AM Best, Standard & Poor’s, and Moody’s evaluate insurers’ financial health using complex metrics most consumers never see. Their letter grades (like A++ or B-) reflect a company’s ability to pay future claims. An insurer with less than an “A” rating might offer tempting premiums, but could become unstable during economic downturns. One state insurance commissioner told me about a mid-sized insurer that collapsed during the pandemic—its “B+” rating had been a red flag regulators noticed too late. 

Dig into annual financial statements. Every insurer files detailed reports with state insurance departments showing their reserves versus liabilities. These documents reveal whether a company has enough assets to cover its obligations. I once reviewed a regional insurer’s filings and noticed its investment portfolio was overloaded with risky commercial real estate—a warning sign that eventually led to liquidity issues. You don’t need an accounting degree to spot trends. If the “surplus” line keeps shrinking year after year, that insurer is eating into its financial cushion. 

Watch for regulatory actions. State insurance departments regularly publish market conduct reports showing which insurers have excessive claim denials or delayed payments. A pattern of complaints suggests financial strain. When a major insurer in my state started routinely denying expensive prescriptions last year, the regulatory filings showed it was trying to conserve cash after poor investment decisions. 

Assess their business mix. Companies overly dependent on one type of plan (like short-term health policies) or one geographic region face higher instability risks. The most financially stable insurers usually have diversified product lines across multiple states. A broker once explained to me how insurers with balanced portfolios of individual, group, and Medicare plans weather economic storms better than niche players. 

Consider their reinsurance practices. Strong insurers share risk with reinsurers—essentially insurers for insurers. This prevents catastrophic claims from bankrupting the company. When reviewing providers, look for mentions of reputable global reinsurers like Swiss Re or Munich Re in their financial disclosures. An executive I spoke with credited reinsurance contracts with saving his company during a bad flu season that spiked hospitalizations. 

Evaluate their medical loss ratio. This percentage (premiums spent on actual medical care) reveals how efficiently an insurer operates. The Affordable Care Act requires at least 80% for individual plans. Consistently higher ratios may indicate underpriced premiums that could lead to future financial trouble. I tracked one insurer whose 95% ratio sounded great to consumers—until they needed a 40% rate hike the following year to stay solvent. 

Check their complaint ratios. Every state insurance department tracks complaints per thousand enrollees. A sudden spike often precedes financial downgrades. When researching my family’s current insurer, I found their complaint ratio had doubled in two years—coinciding with delayed claim payments that later triggered regulatory scrutiny. 

Look beyond the marketing. Flashy ads and celebrity endorsements mean nothing if the numbers don’t add up. A former marketing director confessed how her company launched an expensive ad campaign during financial troubles to boost enrollment and cash flow. The temporary influx of premiums masked underlying problems for about eighteen months, until claims overwhelmed their reserves. 

The most revealing test? Imagine the insurer facing simultaneous crises, a pandemic, stock market crash, and major hurricane. Would they still be standing? That’s the standard I now use after watching my aunt’s insurer fail a much smaller stress test. Her experience taught me that choosing health insurance is really choosing a financial partner for your future wellbeing. The right company should be as prepared for your worst health crisis as you are. 

References

Iowa Insurance Division. (2015, March 7). Understanding insurance company financial stability ratings. https://publications.iowa.gov/23422/

District of Columbia Department of Insurance, Securities and Banking. (n.d.). Surplus for health insurers: How much is adequate? https://disb.dc.gov/sites/default/files/dc/sites/disb/publication/attachments/Attachment%20B%20-%20Surplus%20Requirements%20for%20Health%20Insurers.pdf

Criteria for the selection of complementary private health insurance companies. (2022, November 19). *Journal of Family Medicine and Primary Care, 11*(11). https://pmc.ncbi.nlm.nih.gov/articles/PMC9675121/

Decoding financial health in Kenya’s medical insurance sector. (2025, March 19). *arXiv preprint arXiv:2502.17072*. https://arxiv.org/html/2502.17072