On Insurance

The basic idea of insurance is that, by pooling the risk over a sufficiently large group, the cost of maintaining the status of the smaller pool that actually encounters the hazard will be covered by the overall pool. This idea makes perfectly good sense until a profit motive for a third entity, the administer of the money involved, comes into play. The bottom line is that, if that third party is also in charge of setting the rates, then it is motivated to set the rates at the high end of what the market will bear, since the larger the input from the larger pool, the more profit there is to be made.
When the government gets involved, complications abound. Take auto insurance, for instance. Because emergency rooms so frequently are involved after auto accidents, and because the expense of caring for an injured victim so often falls to government, it makes reasonable sense to require all drivers to invest in insurance. But then you’ve given the insurance companies a market without, for practical purposes, bound. To deal with the conflict in interests that arise in letting insurance companies set their own rates, most states have insurance system overseers of some sort.
Similarly, the idea of a single payer health insurance plan, which was removed from consideration before negotiations even began by Obama when Obamacare was first introduced, would assume some control of rates, presumably by pulling the private sector out of the issue altogether. But Obama wanted the support of the insurance industry in Congress, so he eliminated most of that potentially disruptive problem by dangling a big market in front of them. That rates immediately spiraled out of control should surprise no one.
Now I hear that, after Republicans failed to repeal and replace Obamacare outright, some States, notably California, are considering going the single payer route on their own. Perhaps a better way to label the idea would be to call it “governmentally issued” insurance, for that seems more honest. Unfortunately, though, that would make the opposition’s appeal to anti-Socialism both more potent and predictable. In our present environment, the idea might not get the support it needs.
Anti-Socialism.” Now, there’s a term right out of the McCarthy era. Will we never get over it?

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One Response to On Insurance

  1. Hank Raymond says:

    Health Insurance is not Health Care. That’s something people need to remember. Single payer is the only logical way to go. Why is health insurance tied to one’s job? That makes labor more expensive and consequently makes American companies less competitive in a world market. Perhaps an expansion of Medicare is the way to go. Start lowering the starting age for Medicare. Lower it to 64 this year, 63 next year, 62 the year after etc. etc. Health insurance is a parasitic business that doesn’t do anything worthwhile. It just steals 30% of every dollar spent for health care and in return it gives us a stack of paperwork that’s nearly impossible to understand, especially if you’re seriously ill. And then when you can’t work because of illness and you can’t pay your premium, your insurance gets cancelled! What a terrible system!

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