Sunday, February 24, 2008

Ezra Klein explains health insurance

And it works just the way it has been set up to do, but not quite the way you would want it to.
It's a common complaint that health insurers don't actually offer "insurance." As generally defined, insurance is a form of risk management that individuals use to protect themselves against unpredictable loss -- a car accident, say, or a house fire. Health insurance, by contrast, is a form of risk pooling that individuals use to smooth out lifetime healthcare costs. Heath insurance does not insure us against risks so much as it insulates us against costs. We pay regular premiums so we don't have to directly pay for irregular care.

Not all of us, however, make this deal with insurers. About 50 million Americans are uninsured, and tens of millions more are underinsured. There's no law that says we all must have insurance or that insurance companies must agree to cover us. Given that, it's natural that insurers -- which are, after all, for-profit companies, not government agencies or public trusts -- turn their attention to making deals with the most profitable among us and avoiding deals (or finding ways to break contracts) with the least profitable.

That's exactly what we would expect them to do. We are using them to minimize our risk, and they are selective about us to minimize theirs.
So as long as you stay healthy, you will find health coverage available to you. But forget about it if you get anything more serious or longer lasting than a head cold.

// posted by montag @ 1:34 PM
Comments:
Good article! Short, but very fitting! It is strange (ok, actually it is not strange, it is natural) that people are trying to maximize their profit/ minimize risk, but they don't want insurance companies to do the same! If insurance companies wouldn't be aimed at profits, their bankrupt risk would be much higher. And it is not only about health insurance - check some tips on our long term care insurance Toronto website...
# posted by Anonymous Anonymous : 5:52 AM
 

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