Health Insurance

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Requiring health insurance to cover more things makes insurance more expensive and unaffordable, leading to both higher premiums and deductibles. To understand why this is, let’s ask two questions: what is insurance?

The google definition is as follows:

1. a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

2. a thing providing protection against a possible eventuality.

The purpose of insurance, then, is to financially protect against a “possible eventuality,” generally something viewed as tragic or catastrophic. So let me ask the reader — does this sound like America’s current model of health insurance?

Certainly not.

Let us look at an example of a different type of insurance — car insurance. The purpose of car insurance is to cover damage to your or other drivers’ vehicles in the event of a car wreck. Car insurance is generally a catastrophic model.

Now imagine if car insurance became like health insurance. Let’s say the state mandated that car insurance had to cover oil changes, tire rotations, new tires, tire repairs, new brakes, windshield wipers, headlights, tail lights, brake lights, and basic car maintenance.

What would be the result of such inane public policy? Higher premiums. On top of that, the prices of the aforementioned items would increase because they would be paid for by a third party, not directly by the consumer. Auto parts suppliers and repairmen would be granted more market power to bargain up their prices.

This is what has happened to health care and health insurance.

Reread the previous sentence. Notice how I mentioned both health care and health insurance as if they are two separate things. It’s because they are two separate things.

Too often people fail to understand the difference between the two. Your doctor’s office and the services he provides are health care. Your insurance policy, if you are lucky enough to have one, is health insurance.

There are some easy solutions to solving the problem:

1. What I’d like to see is real catastrophic insurance, and I don’t mean high deductible insurance (which is commonly and erroneously called “catastrophic” insurance”. I mean insurance that covers emergency care, end of life care, and maybe a few other things. It wouldn’t cover routine doctor’s visits or prescription medication. If you wan’t more coverage, you’d be able to supplemental insurance.

If routine visits to the doctor aren’t covered by insurance, people pay for them directly out-of-pocket. This gives more bargaining power to consumers and reduces the bargaining power of doctors.

2. Health insurance co-ops. These are health insurance plans owned by the members, i.e. those being insured. Plans would be established and managed by insurance companies in exchange for a fee from the members, but the plans would be owned by the insured. Because these plans are owned by the members and not the insurance companies, the premiums and deductibles would be kept low.

3. Require health care providers (doctors, hospitals, etc) to list their prices up front. This would give more power to the insurance companies and co-ops to negotiate lower prices and allow consumers to shop around.

4. I’d keep the marketplace website open (healthcare.gov / state-run sites). The catastrophic plans would be available on the website along with supplemental insurance.

5. Move away from the employer-provided insurance model. Allow companies to give tax-free vouchers to employees so they can purchase their own plans, and give more freedom to allow for health savings accounts.

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