Saturday, March 17, 2012

Mandatory Health Insurance Should Be Insurance

According to Wikipedia, insurance is "a form of risk management primary used to hedge against the risk of a contingent uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment."    As defined, insurance shouldn't pay for expected expenses.

For example, car insurance covers unexpected damages and losses (storms, theft, and accident).  Automobile insurance doesn't cover routine maintenance like oil changes, tuneups, brakes and tire replacement.  In addition, home owner's insurance doesn't cover repairs that are due to neglect or after market upgrades.

So if health insurance was modeled after automobile insurance, it would cover unexpected health issues, e.g. accidental injury, or sudden health decline.   It wouldn't cover expected, discretionary health costs such as annual checkups or birth control.   It definitely wouldn't cover lifestyle health costs like erectile dysfunction prescriptions.

While our family has chosen to pay for the maximum health care insurance coverage, I don't believe the same level of coverage should be mandatory for everyone.  When I was younger, my employee insurance premiums were zero.  I was glad to have low premiums for insurance mainly against unforseen health issues.  I had 100% accidental injury coverage after a deductible and payed the full cost of doctor visits up to a deductible.  As a result, I saw my doctor about every three years and only went to the hospital for severe health issues or injuries.

For more on Reflections and Musings, check back every Saturday  for a new segment.

This is not financial or insurance advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC


AS said...

Health care isn't auto insurance. You can't avoid car accidents with preventative car care the way you prevent significant hospitalization through preventive healthcare.

Far too much of current healthcare spend is on acute care (emergency room visits, expensive heart surgeries, etc.) because preventative care was not available or not taken advantage of.

It's far more cost-effictive to pay for preventative care (including annual checkups), and preventative medicine (eg. cholesterol, blood pressure, blood sugar etc.) for many years than to pay for heart surgery (angio, bypass, stent etc.), amputations - very common in diabetes, hospital stays for all emergent situations, etc, etc.

The other thing to consider, is that the uninsured don't get 'negotiated rates'. Even if you are in a high-deductible plan where you pay for the first $1000 in care as a deductible, you get discounted rates. For something as simple as diagnostic blood tests, that negotiated rate can be the difference between $500+ rack rate and $20 negotiated rate. The uninsured get totally screwed.

If you insist on drawing a simple analogy, draw this one: the US is the only first world country that doesn't guarantee health care to its citizens as a basic right. And as a result we have a patchwork insurance model, we spend 6x as much on healthcare than the average first-world country, and we don't even get corresponding health care outcomes. We pay more and get less.

Super Saver said...


You are correct. Health care is not auto insurance. The correct analogy is health care is routine auto maintenance. If I don't change my oil, I will eventually need to replace the engine. Auto insurance doesn't cover replacing the engine when I don't change my oil. Similarly, if I don't eat properly and exercise, I may get heart disease. I don't need health care covergate to figure out a high fat, high salt diet is bad for my heart. I don't need prescription drugs either. Just common sense, good diet and exercise. Least of all, I don't need the goverment involved, when they are considering calling ketchup a vegetable.

Also, if people had to pay for things such as lab tests on their own, competitive market pressures would drive down the cost. Look what happened when health "insurance" stopped covering name brand cholesterol reducing drugs: the drug manufacturers lowered their prices.

Latest I recall, the Declaration of Independence said people were endowed with three unalienable rights, Life, Liberty and the pursuit of happiness. Health care wasn't mentioned and mandatory health care takes away my right of liberty, i.e. Freedom. I know you'll try to weave health care into the right to Life, but I won't buy that since food, clothing, housing and everything can be argued to be included in right to Life, and that isn't what was intended.

If you think the policies of those other first countries are so great, why don't you move to one of those countries? What's keeping you from leaving this horrible country :-)? My parents come to the U.S. because the opportunities were better here. To me, that is no longer true. I'm encouraging my daughter to think about leaving the U.S. because I'm sure Asia will have more opportunities there when she is grown.