One of the great things about owning a URL is that you can write whatever you want. You only have to worry about marring your conscience, hurting someone's feelings, and accidentally going viral.
Today, I risk all three to give you my opinions on health insurance. You don't have to click read more... but I know you want to.
What is insurance?
As any good debater, I shall first define my terms. What is insurance? Insurance is a financial product. It is a contractual guarantee of financial compensation for a specified loss or damage based on the payment of a premium.
I won't press this point too much, but I will say it one more time. Insurance is a financial product. If you insure against kidney failure (for example), your insurer gives you money not kidneys.
What is the single biggest problem with insurance?
One problem with insurance is that those who are likely to need it, want to buy it. Those who are unlikely to need it, don't buy it.
Economists call this adverse selection.
This is a particular problem due to another economic concept called information assymetry. Basically, one party (the insurance buyer) knows more than the other party (the insurance seller). Let's take a rather politically mundane type of insurance to illustrate information assymetry.
As it turns out, all four of my wisdom teeth have emerged or about to emerge. Plus I have two cavities. Total cost to fix my mouth? Around $2,000. Not a huge amount, but if I were on my husband's dental insurance it would cost around $700. The cost of the dental insurance is a cool $87 per month. Do you think I might jump onto his insurance from January to April of next year? Probably.
That insurer is never going to know what hit them!
What is the second biggest problem with insurance?
Another problem with insurance is that insurers and insured people tend to have mismatched incentives. I want to get as much financial compensation from an insurer as I can. The insurer wants to keep as much money as they can.
My goal is my personal profitability. The insurer's goal is their company profitability.
Economists also have a word for this. Life. Just kidding, they would call it discrete, non-cooperative, zero-sum games. It's our least favorite kind.
What is health insurance?
Health insurance is a particular type of insurance product. In it's most basic form, health insurance protects your financial assets if you must undergo medical treatment. It does this by offsetting the cost of medical care, or covering the cost entirely.
Health insurance only gives financial compensation for losses or damages suffered that are in the contract that you and your insurer define.
Do the problems of insurance also apply to health insurance?
Okay, if I must go on at length, I will.
We know that young, healthy people are less likely to buy health insurance. Why? They are unlikely to need it. Even if they need medical coverage, health insurance isn't a particular benefit for them. Why? Young people (this blog readership aside) tend not to have money. They don't have assets to protect. Bankruptcy protection is probably more valuable than health insurance to young people.
Only people with money need health insurance. Health insurance protects your money, not your health. Medical care (in a best case scenario) will restore your health.
Health insurers also face a particularly perverse incentive to treat the most vulnerable like shit. People with chronic illnesses cost a lot of money to insurers. And they cost a lot, for a long time.
For example, if you give birth to a child pre-maturely, you may cost your insurer $1 million. However, you're fairly unlikely to cost your insurer $1 million again. Same thing if you have brain cancer.
However, if you have MS, or ALS, or any number of diseases that end in either the word disease or syndrome, you're probably in for a life long trip. And your insurer treats you like crap. Why? They don't want you to be their customer.
Do you think it's any coincidence that insurers don't cover effective experimental medicines that cost less than your current medications? It's not. It's a way that insurers can try to screen you out. If they give you bad service, and fail to compensate you, etc. maybe you'll leave.
Health insurance may be the single worst way to give chronic sufferers the care they need.
Were you going to say something controversial?
I don't want to give chronic sufferers health insurance.
I want to give them medical care.
I think it would be good if chronic sufferers could have some sort of financial protection. However, that's not my top concern.
So what do you propose?
Obviously, the best possible solution is to be healthy and rich. Thus, you can afford health insurance and not need to use it.
However, such ideals may not be attainable by the majority of the population. For example, those with chronic illnesses, those who are elderly, those who struggle to find and keep high paying employment, those who risked their entire net worth and failed, etc. may struggle to be simultaneously healthy and rich.
Please tell me that wasn't your solution
Honestly, with the political rhetoric today, would you really be surprised if that was my proposal? But don't worry, I have a slightly better proposal. It's been stripped from the Undercover Economist, and it's pretty brilliant if I say so myself.
5 reasons I like my idea
Not that anyone asked, but here are five reasons that I like my own idea.
I'm not going to tell you all the weaknesses of my argument. Okay, I lied. I will.
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.