What Is It About Insurance That Congress Doesn’t Get?

What Is It About Insurance That Congress Doesn’t Get?


Leonard Zwelling, MD, MBA


What is the purpose of insurance—any insurance?

Quite simply it is the vehicle by which risk of bad things happening to individuals or businesses is distributed over a large population of individuals or businesses. Everyone in the population pays into the insurance pool and that money is used by those in the population to whom an untoward and expensive thing has happened that requires money to correct—if possible.

Let’s start with something easy; automobile insurance, a form of which is mandated in every state. Each driver pays into a pool of which there are many (Progressive, State Farm, Geico). If the insured has an accident, the costs or liabilities incurred by the insured are covered by the pool of dollars assembled by the carrier, less a deductible. Liability insurance must be in place to cover damage to others. Collision insurance may be elected as this covers only the cost of an accident to a driver’s vehicle. The rates paid by any driver are prorated according to the risk assessed by actuaries of the individual’s probability for having a mishap. All Americans understand this. Young men pay more than middle age women. Makes sense. They drive faster and text more.

Homeowners’ insurance is also understood by most Americans. They cannot get a mortgage without it. This insurance covers unlikely events like theft and fire. The bank won’t lend you the money for the house unless you insure their investment. In some areas there may be extra insurance available as in Houston to insure against flood damage. Flood insurance is not mandated, but it is a low cost good idea for people who live near bayous.

Life insurance doesn’t insure your life. It provides resources for your family after you die. It is most needed by younger people with family obligations that could not be met if they were no longer living and working. Disability insurance is based on similar principles.

All these examples work the same way. A group collects money for the use of the unlucky individuals in the group who may need to draw on some of it due to an accident or bad luck. Insurance is the thing you buy that you hope you never need.

This is also true for health insurance, except sooner or later, everyone needs it. But America will not deal with health insurance in a similar fashion to the way it deals with all other kinds of insurance. Except if you are over 65. Then you are covered by Medicare for the cost of illness and the money is provided by those working now. You bought a ticket in by paying taxes when you were working.

Congress doesn’t get this concept when it comes to health insurance for those under 65.

Members rebel against a mandate to insure maternity costs in policies owned by men. But policies owned by women cover prostate cancer care. The costs are just being spread as universally as possible. The Republican idea that you can mold a policy for each individual runs counter to the communitarian design of insurance. Everyone is in the risk pool. Everyone pays in. Everyone can benefit if need be—God forbid! Or, the Doctor’s Prayer: “God save me from being an interesting patient.”

How do you set the price for American health insurance?

It could start with an estimate of annual health costs in the nation. Actuaries can do this calculation. This is around $3 trillion now, but a lot of that goes to insurance companies in administrative costs. If there was only one pool of the insured called Americans, why would you need insurance companies? You wouldn’t. That’s a trillion dollars saved right off the top!

But if you want to keep the companies, that can be done, just set one price for the basic American policy which is offered as a non-profit item by any company wishing to sell policies. Then offer a more elaborate policy for those who want more, like shorter waiting times, no deductibles, no co-pays and concierge service. Mental health, drug abuse treatment, and preventative care must be in all policies. A separate higher priced system of niche health insurance (e.g., to cover plastic surgery) is compatible with one that insures most everyone else at a lower price for basic care.

Insurance is not a complex concept despite what Mr. Trump thinks. It has been made complex by those feeding at the trough of the health care-industrial complex of high premiums, high drug prices, and exorbitant hospital charges.

What’s missing is not any good ideas about what to do. The Physicians for a National Health Plan (the single payer docs, of which I am one) have lots of ideas. What’s missing is the will to drive the cattle away from the health care trough and treat health insurance like we treat all other kinds of insurance.

One pool. Everyone’s in. It’s not that complicated Mr. President.

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