Monday, September 28, 2009

Say It With Me: INSURANCE

So many people involved in the health care debate seem unclear on the subject of health insurance. Let's start with a look at the term. From dictionary.com, we have:

in⋅sur⋅ance
–noun
1. the act, system, or business of insuring property, life, one's person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.
2. coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract.

Since some folks have better reading comprehension than others, we'll help everyone out with that word, contingency:

con⋅tin⋅gen⋅cy
–noun, plural -cies.
1. dependence on chance or on the fulfillment of a condition; uncertainty; fortuitousness: Nothing was left to contingency.
2. a contingent event; a chance, accident, or possibility conditional on something uncertain: He was prepared for every contingency.

I'll make the reasonable assumption that nearly everyone knows the meaning of health and thus we can move on to the term health insurance. From the definitions above, we can see that health insurance is a contract one party purchases from another such that by some chance the fulfillment of an undesirable medical condition was to befall the purchaser of said contract, the second party, which supplied the contract, agrees to reimburse the the first party for some or all of his or her medical expenses that arose due to the fulfillment of said contingency, as provided in the contract.

That's all health insurance is, or at least that's what the term health insurance means. A person buys health insurance to protect himself from significant financial loss in the event that he one day is beset by a serious medical condition. I have such a health insurance plan. I pay $340 per month for a family of four for a policy that covers our medical expenses up to one million dollars per person per year.

Now, with such a low premium, the insurance company also has a large deductible. Our deductible is $6,000 per person per year or $12,000 for the whole family per year. No big deal, $12,000 never ruined anyone, and it's unlikely that we'll need to spend that much on health care in any one year anyway (I think we spent about $2k this year). Now to be $50k, $100k, or $500k in the hole due to something serious like cancer, that's a big deal.

Then we have this guy:

My name is Bing Perrine and I live here in Billings, Montana, with my beautiful wife and baby boy. Last June, I collapsed because of congenital heart problems. I need open-heart surgery, but I have no insurance and no company will insure me.

My friends and family have been a blessing. With hearts as big as a Montana sky, they have helped with bake sales and benefits. But my wife and I still owe over $100,000 in medical bills.

None of this debt would have piled up if I had the option of buying into a public health insurance plan. Private insurance companies need competition. They profit by denying care to people like me.

Senator Baucus, when you take millions of dollars from health and insurance interests that oppose reform -- and oppose giving families like mine the choice of a public option -- I have to ask: whose side are you on?
Let's have a closer look at what he said:

None of this debt would have piled up if I had the option of buying into a public health insurance plan.
Meaning: None of this debt would have piled up if someone else was forced to pay for my medical care whether they wanted to or not.

Then he shows his lack of understanding of the term we learned above: health insurance.

Private insurance companies need competition. They profit by denying care to people like me.

The insurance companies denied care to you?!? Did they really? Do the insurance companies even provide health care? No they don't! Doctors, nurses, hospitals, etc., provide health care. As we saw above, insurance companies provide you with insurance. That's what an insurance company does. This is not a difficult concept to grasp! I'm thinking that you got your education from the public option, and maybe it wasn't so good.

Now let's look at what you may have meant to say, that "health insurance companies profit by denying health insurance to people like me." Darn tootin' they do! How can an insurance company survive, let alone make a profit, if they have to insure against contingencies that are 100% certain to occur? I suppose there's one way they could survive, they'd simply charge a premium that is equal to the cost incurred due to the contingency, but then that would leave you in the same $100k hole.

I'll wrap this up, because I'm done steaming, but besides all the other stuff the government could do to improve the health care / health insurance industry (like tort reform, allowing competition across state lines, etc.), they could require that every American purchase a health insurance plan of some sort. It could be cheap and have a really high deductible, but you'd have to have some minimum insurance.

I know I'm gonna lose my libertarian street cred with that statement, but it's true. It must be done. The reason is the following. If some dumbass without health insurance becomes gravely ill, or suffers an accidental, but serious, injury, s/he will not be turned away from the hospital. That person will be treated and we will all get the bill. Much as things ought not to be this way, the fact remains that things are this way. So everyone must have a minimum amount of health insurance.

6 Comments:

Blogger Russell said...

I was nodding my head in agreement until the end :)

Insurance should be like car or home insurance. You buy it in the case of something bad, like an accident, not for general maintenance e.g. doctor visits. My car insurance doesn't pay for oil changes, why should my medical pay for checkups?

"...[W]ould be to require that every American purchase a health insurance plan of some sort. It could be cheap and have a really high deductible, but you'd have to have some minimum insurance."

Gah! You mean like Social Security? How is that working out?

When has anything mandated by the government been cheap? And how minimal are we talking? And how do you enforce it? Like car insurance? That only works with law abiding middle class citizens.


"I know I'm gonna lose my libertarian street cred with that statement, but it's true. It must be done. The reason is the following: if some dumbass without health insurance becomes gravely ill, or suffers an accidental but serious injury, he/she will not be turned away from the hospital. They will be treated and we will all get the bill. Much as things ought not to be this way, the fact remains that things are this way. So everyone must have a minimum amount of health insurance."

So in order to pay for the ones without insurance is to make everyone pay for insurance by government fiat?

I understand your concern, I'm just don't think this is a good way to get the funding.

I mean, we are already footing a lot of this via taxes, why not raise the taxes more to mandate that everyone pays their fair share? How does forcing people to pay into a pool solve the problem of the random case?

Sorry, Carnaby, this is something I am going to have to disagree with you on.

9/29/2009 9:47 AM  
Anonymous Anonymous said...

$12K a year doesn't seem like a lot, until you manage to hit it several years in a row. I got wiped out when I had to have surgery six times over three years. It would have been a lot cheaper if I could have had all six surgeries in one year but life doesn't work out that way.

9/29/2009 10:17 AM  
Blogger carnaby said...

Russel, there is no perfect solution. Mandatory insurance is nothing like social security, but more, like you wrote, like car insurance.

I have health care insurance. I buy it directly from an insurance company as I'm a self-employed individual. I don't want to pay taxes to cover the medical expenses of some yahoo who decides to take the "risk" of not having insurance. The problem is that they are risking MY money, not their own. If they don't buy insurance, but get sick/injured anyway, then YOU AND I foot the bill, not him. I don't want to do that.

If you can think of a realistic alternative, I'm all ears.

Anonymous: the system isn't perfect, but that's what it is. Choosing a high deductible allows the user some choice in how they deal with the risk. Also note that for me personally it's a $6k deductible, $12k is for the whole family. $6k per year is what it costs to make payments for a run-of-the mill four door sedan. It's just not that much money.

And yes, for those folks who simply can't afford it, they will get shuffled off to the government run plan. The government run plan will suck, just like Canada's, and if you can afford the private plan you won't be allowed on the public plan, and the suckiness of the plan will encourage folks to leave it if possible. I lose more libertarian street cred for endorsing health welfare (healthfare?) but it's gonna happen whether I like it or not, better to do it the best way possible.

Lastly, yes, if you have insurance you should be able to continue your insurance regardless of conditions that arose while you were covered. This way you won't have to worry when you switch jobs, become jobless, or become self-employed. All of these may require switching of insurance companies, and it simply doesn't work / isn't fair for someone to be denied coverage in this case. As long as the insurance companies get to factor this in in advance, because it's required for all of them, then this can work.

9/29/2009 11:46 AM  
Blogger Russell said...

"Russel, there is no perfect solution."

I know, I know. But I'm not sure mandatory insurance enforced by the power of the government will do anything to address this specific problem.

"If they don't buy insurance, but get sick/injured anyway, then YOU AND I foot the bill, not him. I don't want to do that."

What if they don't buy the insurance and still get sick/injured? Won't we still foot the bill? And then what will be the incentive for buying it if can get the same coverage?

Heck, what if you just don't pay it? Jail time? Then we are footing the bill, elsewhere? How about illegal aliens? The homeless?

At what age do we mandate with force to start paying? Who runs the funds?

"If you can think of a realistic alternative, I'm all ears. "

Darn you with your realistic expectations!

How about some sort of medical IRA that you can contribute to as much as you like and that is what is used to pay for treatment? Combine that with optional catastrophe only insurance and people have more control over how and what they spend, right?

But what about the case you are talking about? The poor fellow without the means?

I'd think payment plans would be a good option. And maybe seeing what we can do to recreate the way hospitals were run in the past, by donors from the community, but have the focus on creating charity groups that pay for the less fortunate?

I dunno, that might be all pie in the sky thinking, more so in the current political climate of "big government is the solution to any problem" but I just think (or maybe it is just a wish) there are better solutions than a mandate to pay for insurance.

9/29/2009 12:38 PM  
Blogger DirtCrashr said...

Well, they don't buy insurance and still come across the boarder to California to have babies and we foot the bill - and we keep footing the bill, over and over - but that's another story, one about how California is going bankrupt.

10/14/2009 4:46 PM  
Anonymous Anonymous said...

Wait - are you saying that insurance companies should not be forced to sell people insurance, but all individuals should be forced to buy insurance? How would that work? Fine/jail people with congenital heart defects because they were born uninsurable? I don't get it.

-Raf

10/30/2009 2:32 PM  

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