Saturday, December 4, 2010

A Pre-Existing Outcome

With the new Congress about to be seated, the health care issue is sure to come up again. The issue is worth another look before the fur really starts flying.

First of all, I'm not an insurance guy, but I think I get how it works...I take out a health insurance policy so my medical bills can be covered in case I get sick or hurt. An insurance company will write an insurance policy on me if it believes it will make more money from my premiums and their reinvestment of my premiums than they pay out for my medical bills. That's fair enough. They take a risk on me and their confidence in my good health. I'm fine with that. We both hope I'm a good risk, but for different reasons. I'm fine with that too.

In an odd twist of irony perhaps, I hope my insurance company is REALLY good at minimizing its risk exposure because if I ever need to collect on my insurance, I want it to have PLENTY of money available to pay up. I want them to be very successful and profitable. But since they're speculators, they might write a policy on me today and I might get hit by a truck tomorrow. Their loss (mine too, I suppose), but they took a chance on me. Sometimes they win, sometimes they lose.

Let's say I've been plodding along without health insurance because I think I'm bullet-proof. Then, let's say that during a softball game that I'm really too old and out of shape to be playing, I keel over with a heart attack. Thankfully, it doesn't kill me, but it does scare me enough to inspire me to go shopping for health insurance once I get out of the hospital. I have to admit that I'm not going to be too surprised if I can't find a company to write a health insurance policy on me at that point. If I was honest, I'd admit it would make no sense for them to cover me if I have a pre-existing condition since they won't make enough from my premiums to pay my bills before next week's doctor's visit. The only way they could do that would be to either charge higher premiums to healthy people or to bundle my coverage with a group or family plan. Charging higher premiums to healthy people wouldn't be a competitive option at all, so the group plan is looking better. There's no way I should expect the company to write a policy simply for the honor of promptly paying my bills. Seriously.

Well, no one likes to see or hear about people not being able to get health insurance. This is America; people should be able to get all the health care they need, shouldn’t they? How do people who don't have health insurance get their health care paid for?

If I get into a car accident and I’m rushed to the emergency room, they’re going to take care of me. At some awkward moment, they’re going to ask me how I’m going to pay, but let’s say I can’t. I don’t have a job and I don’t have any money. Are they going to roll me out into the street? No. They’re going to care for me and they’re going to “eat” my costs. I say they’re going to “eat” those costs, but no one in business really eats losses if they know what they’re doing. They’re going to pass those losses on to their other customers (patients). What happens then? When the guy down the street goes to that hospital to have his appendix removed and he gets that beefed up bill for medical services, he’s going to turn it over to his insurance company. Is the insurance company going to eat it? No, they’re going to spread the cost out amongst their policy holders. So, under the current health care system, who pays for indigent health care? One or more of the following: People who get sick, their employers, or their insurance companies.

So, we have to wonder why there is such a push in some corners of the government for health insurance for all, including those with pre-existing conditions, when we must know it's a failing business proposition for insurance companies. With no way to protect their risk assessment models and earn a profit, these companies would surely fail under severe anti-entrepreneurial mandates. If insurance companies fail, where would we be then? Well, I guess we could require everyone to purchase government health insurance to go along with their government health care. Maybe the government will save us...