Southern Bread

Health insurance over the last 10-12 years has absolutely skyrocketed in price. I’m currently paying about $450 dollars for family coverage. My employer covers the other half of the bill for me. So, the total cost for family coverage is around $900. That’s unbelievable. Especially when you consider the fact that my family rarely gets sick. Sure, we have our bouts where the kids(otherwise known as snuggleable petri dishes) get sick a few times, but for the most part we never go to the doctor. So why is my bill so high? As with so much in this modern era, the answer lies in government meddling. You can’t be surprised at this point. But first, what is the rough outline for how insurance is supposed to work?

Insurance is about risk. Risk is king. Contrary to popular belief, insurance companies are not in the business of pooling risk. Instead they use risk analysis to determine, based on a wide array of factors, how much risk a certain person or item poses to them. They then use that calculation to arrive at a premium price that balances that risk. In this way, each thing being insured gets analyzed and accounted for to keep one bad seed from ruining the whole. This is fairly straight-forward when it comes to non-people. Things like houses are easily priced based on a consistent set of variables that are not hard to predict. For instance, if you have a house alarm, your premium is discounted because the insurance company’s risk has been reduced. Likewise, a car is very easy to analyze because all of the factors – total value, repair cost, driving record, etc. – are readily known and can be quantified.

The story changes dramatically when you consider people and healthcare. The only two really measurable things about a person are age and medical history. If your medical history is short and sweet and you are relatively young, you probably don’t pose much risk. Sure, you could get sudden cancer tommorrow. But the risk of that is all in the risk analysis calculations. But the devil is on the backend. When you actually do get sick, the cost is extremely hard to predict. Something that seems small can quicly blossom into a very costly sequence of Dr. visits. We all know someone who went to the Dr. when they felt bad and ended up being sent to 10 different clinics and specialists because of abnormal test results. It’s those types of things that would normally cause insurance premiums to slowly rise. But, what we’ve seen in the past few years are government mandates that require insurance companies to cover people they wouldn’t normally cover or would charge very high premiums to.

This has the effect of blowing up risk analysis. The end result is a more pooled approach, where every one else subsidizes a chronically sick person with their premiums. This pooling will necessarily cause premiums to go up rapidly to cover this huge added risk. So, take all that into consideration when you read this section of an article from American Spectator:

There are two questions here. First, what will happen if health insurers are forced to cover every American without respect to pre-existing conditions or medical history or anything else? It turns into a giant, private sector version of Medicare where pooled risk will cause rates to soar beyond anything imaginable. Second, why are these “insurers, doctors, hospitals and business groups” in favor of something so ludicrous as this? They aren’t. This is just like what we are seeing in the energy sector with all these companies “going green”, like GE and their eco-magination. They are trying to get out in front of legislation they fear is coming from this administration and at least have a voice in it. I guarantee the health sector is terrified of the federal government right now. By participating they can at least avoid being thrown under the bus totally.

This is gonna be long so I’ll pick it back up tommorrow and talk about the specifics in the article…