Insurance is RISK POOLING.
A group of people get together, generally under the organization of a for-profit entity, and each person or unit pays into a pool. The purpose of the pool is to pay out to any paying member of the risk pool SHOULD AN ADVERSE EVENT HAPPEN TO THEM. In a sane world, these adverse events are rare, unforeseen and catastrophic or potentially catastrophic.
The more people that pay into the pool, the lower the premiums can be – to a point. Why? Because across large groups, analysts and statisticians within the for-profit company can estimate, with greater and greater precision, the number of adverse incidents that will probably occur within the risk pool group. This is called ACTUARIAL SCIENCE, and a person who studies the frequency or risk of certain events across large groups or populations is called an ACTUARY. So, the larger the risk pool, the more precise and accurate the actuarial studies can be. It is impossible to predict what will happen to one individual person over the course of, say, the next year. HOWEVER, it is possible, and morally licit, to say that over the course of the next year, within a group of, say, 100,000 people, how many can reasonably be expected to be diagnosed with cancer, get in a serious car wreck, have a heart attack, be run over by a Zamboni machine, etc.
Insurance companies can also factor into their premiums activities that individuals engage in that increase the risk of an adverse, or “risk event” occurring, such as smoking, heavy drinking, OBESITY, aberrosexual activity, participation in so-called “extreme sports”, and so on.
What makes absolutely no sense whatsoever, and what indicates to me that a person is completely intellectually unserious and should be utterly disqualified from any adult discussion about health insurance is the notion that insurance can and should cover pre-existing conditions. You know, like Donald J. Trump. Sorry, folks, but Trump has been not just a stalwart advocate of single-payer, aka universal government “insurance”, but has and continues to beat the drum on coverage for people with “pre-existing conditions”.
Read this over and over again until you understand:
“Health insurance” that “covers” pre-existing conditions IS NOT HEALTH INSURANCE. It is a fraudulent asset-shifting racket. This is a mathematical fact, not a matter of opinion. It is not debatable. Now if you are sitting there reading this, falling for the brain-dead agitprop that has been spewed from the government-financial-media complex for the past fifteen years or so, thinking what a horrible, cruel, mean-spirited person I am, listen up and listen good. YOU ARE OPERATING ON THE FALSE PREMISE THAT INSURANCE IS 100% NECESSARY TO COVER MEDICAL EXPENSES. It is not. It is precisely because of the evil perversion of the entire concept of insurance that healthcare costs are what they are, and continue to inflate on an exponential curve – right now 9% per year, which puts the doubling period at EIGHT YEARS. (Remember the Rule of 72. Divide the annual percent rate of increase in costs into 72 and you will get a very close approximation of the time it takes for the cost structure to double in price.)
Do you understand that most people should be able to pay, and pay fairly easily, for even fairly serious healthcare costs? Do you understand that the indigent poor should be EASILY provided for by, first and foremost THE CHUCH (have you not noticed that almost all hospitals USED to be named “Saint So-and-so’s Hospital”?), along with secular charitable healthcare providers? Do you know why healthcare costs are INFLATING AT ALL, much less at NINE PERCENT PER YEAR? One reason. Insurance – more precisely, the criminal asset-shifting racket that is commonly called “insurance”. If it weren’t for that, not only would healthcare prices NOT INFLATE AT ALL, they would DEFLATE exactly as the example of LASIK Vision Correction, which has deflated in price by 95% while simultaneously seeing massive advances in the technology involved.
The entire question of “pre-existing conditions” IS ONLY GERMANE WITHIN THE CONTEXT OF INSURANCE, WHICH SHOULD BE UNNECESSARY AND PURELY OPTIONAL ANYWAY. All insurance should be is a purely optional risk-management product that protects ONLY against catastrophic events, and thus is relatively inexpensive just by virtue of what it is.
No one should NEED health insurance.
No one should NEED health insurance.
No one should NEED health insurance.
As an aside, it bears mentioning the difference between health and car insurance. Car insurance, specifically LIABILITY insurance, should be required of drivers because driving is an OPTIONAL activity. Health insurance revolves around simply living and being alive. Living and being alive is not an “optional” activity the way driving a car is. If you freely choose to drive a car, it is perfectly just for the society to pass a law requiring you to carry LIABILITY insurance – that is, insurance that covers damage that YOU MIGHT CAUSE TO OTHER PEOPLE AND/OR THEIR PERSONAL PROPERTY (VEHICLES) ON THE ROAD. It is wholly unjust for a government to DEMAND that citizens purchase a service commodity (i.e. health insurance) as a condition of waking up breathing. The fact that the service commodity in question is also a criminal asset-shifting racket just adds icing to the cake.
Now let’s go back to discussing the mathematics of this. Insurance is only insurance if it is covering something that either HAS NOT YET HAPPENED or is NOT LIKELY TO HAPPEN.
Again, that statement is a fact. It is not debatable, and has nothing to do the anyone’s FEEWINGS, or what the wretched antipope in Rome, or his butt-kissing hangers-on bleat. Remember what we discussed in yesterday’s post about the post-Christian west being an anti-meritocracy? Remember what we discussed about the higher the office, generally the more ignorant and more inept the officeholder? Yeah. The college of bishops is right there with the academia and high-level politics as the poster boys for this sad truth. FUNCTIONAL RETARDATION.
So, if insurance can only be risk-pooling for an event that has NOT YET HAPPENED, right off the bat anyone with two brain cells to rub together will intuitively understand that one CANNOT buy insurance for something that has ALREADY HAPPENED. The entire notion in completely nonsensical. I can’t call an auto insurance company and buy a policy as I am standing on the side of the road having just wrecked my car two minutes before. The PROBABILITY of the adverse risk event (a wreck) occurring is 100%, or in actuarial parlance 1.0.
Now let’s think even harder about this. The ONLY WAY an insurance company could stay afloat given the insane premise of being REQUIRED to insure adverse risk events that have ALREADY HAPPENED is if the insurance company charges as its premium the FULL COST of repairing/replacing the already-wrecked car PLUS the costs and overhead of the insurance company itself, plus a profit. (My cattle marketing students will remember well that since breaking even is unsustainable, it is thus a species of failure. In order to not fail, a business must be profitable. Therefore, profit is itself a cost. In order to stay in business, a business must be profitable, therefore profit is itself a cost.)
So, now think this through. If the MINIMUM the insurance company can sanely charge as a premium on an event that has already occurred is the cost of the repair/replacement PLUS all operating/overhead costs of the insurance company PLUS a profit, WHY IN THE BLUE FIRELY BLAZES WOULD A PERSON NOT JUST PAY FOR THE REPAIR/REPLACEMENT HIMSELF, MINUS THE OVERHEAD COSTS MINUS THE PROFIT MARGIN?
If you are struggling to understand this, it is because you have been brainwashed into thinking that insurance is a “free lunch” – you have been conditioned to believe that insurance is simply when you give people a small amount of money, and they give you back a very large sum of money – apparently for absolutely no good reason at all. If you think that it is morally licit to have the premiums paid by the other members of a risk pool who paid their premiums IN GOOD FAITH to protect them against the POSSIBILITY that something COULD HAPPEN, while you demand a payout having put in the same premium or no premium at all AFTER the adverse event has already happened, then you need to sit down and think long and hard until this becomes clear, or you acknowledge to yourself that you do not believe in the Seventh and Tenth Commandments, which, you know, will make for a pretty awkward Particular Judgment.
The next concept is the idea that insurance should pay out on “risk events” that are GUARANTEED to happen. So what are payout events that are “guaranteed” to happen? Annual physicals, check-ups, tests, etc. THESE ARE NOT INSURABLE EVENTS, BECAUSE THEY ARE “GUARANTEED TO HAPPEN” BY VIRTUE OF WHAT THEY ARE: PREVENTION. So, again, the only sane way for this to work within the context of insurance is for the cost to the insured person to be the total cost of the service, plus the overhead and operating costs of the insurance company, PLUS a profit margin.
If we were to write this as a formula, it would be:
(Service Cost + Insurance Overhead Cost + Insurance Company Profit) X Probability of Adverse Risk Event = Premium
The reason why real insurance premiums are a fraction of the Cost Term is because the Probability coefficient is less than 1.0. Let’s say the odds of getting a brain tumor over the broad populace is 1 in 500,000. That is to say, in the total population, it can be reasonably expected that 1 in every 500,000 people will develop a brain tumor. So, the insurance company turns that into a coefficient that they then plug into the formula. If the total current average cost to treat a brain tumor plus insurance company overhead costs plus insurance company profit margin is $300,000 (I made that up), and the brain tumor probability coefficient is 0.000003622 (I just made that up too):
$300,000 multiplied by 0.000003622 = $1.0866.
Divide that by twelve to get it to a monthly figure and you get $0.0955. Let’s say your total monthly premium is $100. So, we could think of it as nine and a half cents per month out of your $100 premium is your “brain tumor” risk premium. The nine and a half cents per month pays into the “brain tumor risk pool” and insurance company costs plus profit.
Now, let’s walk through this if the risk of brain tumor is 100%, which is to say, it has already happened that you have been diagnosed with a brain tumor, aka a PRE-EXISTING CONDITION, so the Probability coefficient is 1.
$300,000 X 1 = $300,000
If the insurance company charges ANYTHING LESS than $300,000, they will go out of business, guaranteed.
This applies in exactly the same way to events that are GUARANTEED to happen, or even mandated in some cases, such as annual physicals. If the insurance company charges anything less than the total cost plus overhead plus profit, then they will go out of business. The notion that insurance policies should cover guaranteed-to-occur events with even ZERO CO-PAY is so jaw-droppingly stupid that it can’t even be described.
The insurance company will go out of business UNLESS they embezzle funds from their actual, legitimate risk pooling customers to the person with the pre-existing condition, or to cover “guaranteed-to-occur” events, that is, events with a probability coefficient of 1.
Which is exactly what happens. What is called today “health insurance” is no such thing. It is a criminal asset-shifting scheme, which the insurance companies, in total cooperation with the government, broker and execute.
Now, you have to ask yourself with regards to Trump and all of these other politicians, do these people not understand this, OR do they understand it and are dishonest, and WANT the entire health insurance, and ultimately healthcare delivery paradigm to implode? Because it is one or the other, folks.
This is why whenever ANYONE starts talking about “insurance for pre-existing conditions”, I immediately write them off as either galactically stupid, or nefarious. Without exception.
Not only does this issue require serious adults, it requires honest people. Barring supernatural intervention, there will be no turning any of this around until serious adults that are also people of integrity occupy the halls of power.
In other words, we’re screwed.