How many of us truly understand the business of insurance? I know a lot of people (especially those who want to see the government get into the health care insurance business) don’t seem to have a grasp for the basics. So, let me see if I can help.
When a person buys car insurance, he or she is betting that he or she is going to have an accident and wants someone else to be responsible for the repair bills. Conversely, the insurance company that sells the policy is betting that the car will not be in an accident.
It is simple arithmetic. If the car owner pays $1,500 a year to insure the car and nothing happens, the insurance company makes $1,500. If the car is in an accident, the insurance company loses money.
Now, if a person went to Vegas and waited for the roll of the dice before placing his or her bet, the person running the table would not allow it. If you want to gamble, you must play by the rules.
So, if a person bought a $40,000 luxury car and waited until he or she had an accident before trying to buy insurance, he or she would be told to go pound salt. A car insurance company will not cover a pre-existing condition.
That would be like trying to buy life insurance for a person who has already been embalmed.
Going back to the original example, the car being insured for $1,500 a year could easily cost several thousand to repair. Therefore, the insurance company has to hedge its bets by selling policies to as many people as possible. For every car that is in an accident, they hope to have hundreds that are not.
So, what’s so different about health care insurance. As far as gambling is concerned, it’s basically the same. The person buying the policy is betting that he or she will have a medical problem that will cost a lot of money. The insurance company is betting that the policy holder will live a long and healthy life.
While no one seems to have a problem with the drivers of luxury cars paying more for their car insurance than the folks driving the compact economy cars, lots of folks seem troubled with the idea of health insurance companies charging more for people who are overweight or have bad habits like smoking and drinking.
And heaven forbid that the health insurance company doesn’t want to take on the expense of a person with a pre-existing condition!
There are two factors that lead to people trying to buy health insurance when they have a pre-existing condition. The first occurs when a person changes jobs or moves to another state. Because of the laws (that can easily be changed) not all insurance companies can sell insurance in every state, and different employers use various companies. The HIPAA law is supposed to insure portability. It does not. So, let’s fix HIPAA!
The other cause of the pre-existing conditions problem is the people who don’t believe they need health insurance. Once again, there are folks who refuse to believe the uninsured would be uninsured on purpose. Maybe they should look at the number of uninsured motorists who, by law, are supposed to have insurance. Those folks buy it and keep it long enough to get their licenses renewed. Then they stop making the payments.
Granted, there are many people who simply cannot afford to insure their cars or their health. Many would much rather spend the money on more important things like cigarettes and iPods.
Until we reach our mid-twenties, most of us feel we are immortal. Many of us don’t even think about health insurance until we get married. For many, the move to get insured comes too late to have that first baby’s birth covered.
If a twenty-four year old suddenly has severe health problems and is diagnosed with a long term chronic illness, should an insurance company be forced to sell him or her a policy even though it’s clear they will only lose money on that person?
That’s not a gamble. That’s a route directly to bankruptcy.
This is where I agree the government should be involved. They should either insist that everyone be insured (and that the companies can not drop them for any reason), or step up and pay the medical bills for the immortal souls that saw no need for spending money on health insurance.
As for those who truly cannot afford to buy health insurance, the first thing that should be checked is their status as citizens of the United States. If they are properly documented, let tax payer money be used to pay for their insurance – with the private company of their choice.
Let’s stop painting the insurance companies as the enemy and put the blame where it properly belongs. Our professional politicians could fix this problem any time they want. But as long as it goes without being fixed, they’ll always have a platform for the next election.