With the election of Donald Trump, there is a lot of talk about the future of Obamacare. Will he repeal it? Will it be fixed? These are of course pertinent questions, but I’d like to ask a more basic one; what does insurance really insure?
We are all familiar with insurance. The most common ones are Auto, Life, Home, and Health insurance. We all have one or more of these, so you would think that we know what theyinsure. Auto insurance insures cars. Life insurance insures life. Home insurance insures a home. No. All insurance insures one thing, and one thing only, wealth. Insurance is simply a way for everyone to pool their risk in order to protect their wealth. Banks require full coverage insurance when issuing car loans, in order to insure their own wealth against accidence which could destroy their collateral. They know that if the car is no longer worth the amount that is owed that the borrower may consider defaulting on the loan and let the bank repossess the now worthless auto.
Home insurance protects wealth from major damage that a regular person could not recover from such as a fire or tornado. People simply can’t afford to absorb such expensive damages. It would bankrupt them to have to replace a home, especially if they still owe a considerable amount for it.
Life insurance does two things. First, it covers the expense of a funeral. Second, it seeks to replace the income that the insured would earn for his family not that he is no longer able to. Generally, the top income generator in the family will have the greatest amount of insurance as they have the greatest amount of earning potential to replace upon their death.
True insurance pools the risk that you’d go broke, or leave your family financially devastated if the worst should happen. Auto insurance does not cover dead batteries. Home insurance does not cover a broken water heater. These normal costs of ownership would be too expensive to cover. That is why the higher the deductible that you are willing to accept, the cheaper your insurance will be. Consider the paperwork that would be created if every time a windshield wiper needed replaced, or a lightbulb burned out we filed a claim with the insurance company.
This brings us to Health insurance. Health insurance is not treated like the other insurances at all, and to our detriment. When your car is damaged, you get estimates, and the insurance company writes you a check. When a truck backed into me and put a 700 dollar hole in my 17 year old bumper, I used that money to buy a guitar. But when my doctor sends me for a 2000 dollar echocardiogram, I pay a few hundred dollars to the hospital, but I never know what the true cost of that procedure was. Health insurance insulates us from cost, and if we have learned anything, when the cost is born by someone else, people will take as much of a good or service as they can. Our health insurance makes it not only impossible to know what something has cost, but what something will cost. Ask before you have a procedure or surgery what the cost will be. They may be able to tell you what your portion is, but they really don’t know what the cost is. That is all based on billing codes, insurance write downs, hospital negotiated prices. Usually, you get a bill for your operation 3 months after you had it and for the next 4 months after that.
Not knowing the price of the goods and services we are getting is just one of the reasons healthcare is so expensive. We are forced into policies that not only provide coverage we don’t need and would not pay for, but cover every day medical needs for which we don’t need to insulate our wealth. Sure it can be a jolt to pay 80 to 100 dollars to see your doctor, but if we eliminated all of the paperwork that using insurance demands, his costs and your price will drop considerably. We don’t need insurance for those types of expenses. If health insurance protected us from financial ruin due to an operation, or expensive treatment, the overall cost of insurance would go down, and the reduction in paperwork would drive the price down. With insurance companies no longer between us and the doctor, his prices would be known to him and to us. We could shop around and that competition would also reduce prices. Until health insurance becomes wealth insurance, we are going to overpay due to lack of pricing information, and deal with shortages as people take far more than they need.
Charles Hagerman is married with two daughters. He spends a great deal of time listening to music, and watching tv and movies. Most conversations with him will feature movie quotes, and potentially, him breaking out into song. He is a self taught musician who plays guitar at his church. Additionally, Charles is a self taught programmer, studies economics and various languages using the internet, and is a tireless defender of liberty.