Master

The threat of substitutes is the risk that a consumer, or a potential consumer would switch to a competitive product or service. In the area of the health insurance industry, there is no real force that threatens to substitute the health insurance industry. Since there is no alternative of health insurance on an individual and corporate bases. (Grant p120)

The insurance industry consists of plenty of substitutes within the industry itself. Most large insurance companies offer similar types of services. This service would be to protect against risk; regardless if it is auto, home, commercial, health, or life insurance, chances are that there are competitors that can offer similar services. Yet generally, substitutes in the health insurance industry are limited to a select few. In the insurance industry there is a low threat of substitutes. Within the health insurance industry there is an advantage for companies focusing on particular areas, usually allowing them to gain a competitive advantage. This advantage depends entirely on the size of the niche, and on whether or not there are any barriers preventing other firms from entering. (Investopedia)

For the health insurance industry, there are a low number of substitutes that would be able to pose as a real threat to its industry. The definition of substitute products, the health insurance industry is competitive force, as they could take away demand or tie up those customers who choose to use the substitute instead of the main product; one cannot generally label a product as a substitute for health insurance. One can choose to enroll for heath insurance via work, privately, or not seek heath coverage at all. If someone does not seek health coverage, they will possibly pay for necessary medical costs when needed or seek cheaper alternatives. One alternative is that they could seek health care outside the United States, in a third world country that does medical treatments for a fraction of the cost in the United States. Currently, with in the United States the main alternatives buyers have to have health insurance would be to cover their own medical expenses, enroll in a health maintenance organization, or pay for health care costs themselves. The rising cost of medical care and emergency services, especially for chronic and terminal medical conditions without health insurance, is an unattractive option. Consequently, 83.2% of the US population is currently enrolled in either government or private health insurance. (Centers for Disease Control and Prevention)

Even though there are other substitutes to health insurance, such as health maintenance organizations: HMO, PPO, POS they are not a desirable option for an individual for health care. However they are becoming increasingly attractive to small businesses that want to attract quality personal to their work force, but cannot afford traditional health insurance benefits to employees. So these managed health care plans such as HMO, PPO, and POS are becoming attractive substitutes to health insurance, but not a direct threat. (U.S. Census Bureau) The benefit for the consumer, in