Briefly, since I'm on mobile, I'll explain why I think you're completely wrong.
Insurance doesn't seek to prevent the inevitable. That's not why we buy insurance. We buy insurance to insure against catastrophic risk. Would you rather flip a coin and lose your house, or flip 10,000 coins where each toss risks $100?
Humans are risk averse, and there is plenty to say about the value of risk reduction. We buy insurance as a trade off: we know we're getting skimmed by the salesman, but our preference for reduced volatility means we gladly take a small certain loss instead of a possible huge one.
On the other end, insurance sales men don't just sit on their obligations. They swap risk and find complementary risks: it's highly unlikely a hurricane in Florida will happen at the same time as an ice storm in the north east. Tally up all the insurance salesmen and you'll find they all aim to hold a bit of each other's risk. They, just like us, prefer to take a small certain loss than a possible disaster.
This is the purpose of insurance: to dilute the 'pain' of singularly disasterous events across a large enough population so we collectively do better off.
Health insurance is supposed to be the same way: you shouldn't need insurance for buying aspirin at Walgreens. $5 ain't gonna kill you. What will seriously damage you is an unforeseen large medical expense. As it stands, most people don't really need much in the way of serious medical care- it's true to say that a small population of people incur far higher medical expenses than the rest of society. This is exactly the purpose insurance was designed to deal with.
I leave my discussion here. I recognize that there is something deeply unfair about leaving a population out in the cold. I agree, we ought to do something for them, but this is not a critique of our social policies at large. I mean to simply remark that insurance is exactly the financial vehicle that best serves to smooth out the consequences of unlikely yet expensive occurrences.
> Insurance doesn't seek to prevent the inevitable. That's not why we buy insurance. We buy insurance to insure against catastrophic risk.
Ideally, that would be the purpose of health insurance, but in the USA its used to pay for essential health care such as regular visits to your dentist or general practitioner, or to get the negotiated rate on prescription drugs.
When people talk about the inevitability of healthcare use, they don't refer to heart attacks, an onset of cancer, or broken legs. They refer to chronic conditions like arthritis, or high blood pressure that will plague the vast majority of people simply because of their increasing age. These chronic conditions are seemingly inevitable, and are factored into the cost of health insurance.
I leave my discussion here. I recognize that there is something deeply unfair about leaving a population out in the cold. I agree, we ought to do something for them, but this is not a critique of our social policies at large. I mean to simply remark that insurance is exactly the financial vehicle that best serves to smooth out the consequences of unlikely yet expensive occurrences.
The problem as I see it is that insurers swap and reinsure risk based on classifying the customers into various tranches. If I have a lot of accidents and tickets, I'll pay more for car insurance. I can expect the same fate if I buy a Corvette rather than a Civic. If my house has a thatched roof, I might have to pay more for fire insurance. If I live in Florida, I might pay more for flood insurance but less for earthquake insurance. If I smoke, I'll need to pay more for term life coverage. But my health expenses are correlated to nothing so much as my age. There's not that much I can do to change that. I can buy a different car, or a different house, or move to a different state, but no matter how healthy I strive to be, my last year of life is virtually certain to be more expensive than any other. Very possibly more expensive than all of the other years combined.
My mother had great insurance, thanks to her civil-service career back in the 1950s and 1960s... and in the three weeks leading up to her death (of old age, more or less) in the 1990s, the medical bills probably consumed half the economic value she contributed during her lifetime. That was not a "risk"... it was practically a certainty. In the absence of a sudden cause of death. I'll probably experience the same thing, and you probably will too.
So if "insurance" is just code for time-shifting the payments that the healthcare industry will eventually demand from almost all of us -- which it is -- how can that be the right economic model? It doesn't work anything like any other form of insurance. It might not be a racket, but it's also not a free market.
Insurance doesn't seek to prevent the inevitable. That's not why we buy insurance. We buy insurance to insure against catastrophic risk. Would you rather flip a coin and lose your house, or flip 10,000 coins where each toss risks $100?
Humans are risk averse, and there is plenty to say about the value of risk reduction. We buy insurance as a trade off: we know we're getting skimmed by the salesman, but our preference for reduced volatility means we gladly take a small certain loss instead of a possible huge one.
On the other end, insurance sales men don't just sit on their obligations. They swap risk and find complementary risks: it's highly unlikely a hurricane in Florida will happen at the same time as an ice storm in the north east. Tally up all the insurance salesmen and you'll find they all aim to hold a bit of each other's risk. They, just like us, prefer to take a small certain loss than a possible disaster.
This is the purpose of insurance: to dilute the 'pain' of singularly disasterous events across a large enough population so we collectively do better off.
Health insurance is supposed to be the same way: you shouldn't need insurance for buying aspirin at Walgreens. $5 ain't gonna kill you. What will seriously damage you is an unforeseen large medical expense. As it stands, most people don't really need much in the way of serious medical care- it's true to say that a small population of people incur far higher medical expenses than the rest of society. This is exactly the purpose insurance was designed to deal with.
I leave my discussion here. I recognize that there is something deeply unfair about leaving a population out in the cold. I agree, we ought to do something for them, but this is not a critique of our social policies at large. I mean to simply remark that insurance is exactly the financial vehicle that best serves to smooth out the consequences of unlikely yet expensive occurrences.