OBE, for short–that’s a much used phrase from a once upon a time former supervisor. Applied to projects, assignments, etc., it meant the task at hand no longer needed doing. Some might suppose that recent election results might make that an epithet applicable to health care reform. But as President Obama said in his state of the union address, it still is something needing doing. As an aside, in my own case, OBE also refers to the bronchitis that took a toll on me recently–a partial excuse for the interval between my last post and this one. So, a couple more installments on the main topic.
Prohibiting insurors from refusing coverage of pre-existing conditions seems a bit unfair to them on the one hand or a prescription for higher rates for everyone does it not? However, while there may be some cross subsidization by healthy people of sick people, consider the alternatives. Those sick people who can’t afford or are unable to obtain coverage, will go to emergency rooms–soaking up available resources from people with genuine emergencies. Those uncovered people will also be out and about in stores, schools, neighborhoods, etc., where any communicable illnesses they may have can impact on the rest of us. In other words, we may all wind up paying for or suffering on account of denying coverage to others. So in the long run, it may make more sense to find a way to pay for coverage for them, pre-existing conditions and all.
Because health care (chiefly what hospitals, doctors, laboratories, pharmaceutical companies and drug stores provide us with) is so expensive, most people find it difficult if not impossible to pay for out of pocket. Well duh! Yes, I know, it is so obvious–but I mention this only as a preface to serve as a distinguishing feature to the the health insurance issue. Insurance, in the general sense, is a pooling of risk by individuals who contract with an insurer who promises to reimburse them if stipulated risks or events occur. One can buy insurance against almost any form of risk. You buy whole life insurance and “win” the bet with the insurer if you die earlier than the time by which your premiums exceed the policy payout. You buy term life insurance and pay a lot less during your 40s or 50s because the insurance is for a fixed period during which it is not so likely you will die. Property and casualty insurance covers your house, your car, your boat, or you as an individual against loss due to covered perils or liability to others for harms caused on your property or by your negligence. There are many other forms of insurance, including health insurance. But health insurance has some peculiarties, which partially explains the difficulties of making sense of health care reform.
Like other forms of insurance, the insurance companies ostensibly base their premiums on the risk that they will have to pay out on the health insurance policies. But they earn their income not simply on the difference between the payout and the premiums but on the revenue earned on the investment of the capital in the form of premiums. So when the stock market goes south, they, like other institutional investors take heavy hits. Then again, in the case of health insurance, many major companies are not-for-profit rather than stock holder owned. Accordingly, they don’t have to win on the investments–except they do if they want to price their products correctly. Also, unlike the case of homeowner insurance–payouts for which may ebb and flow with hurricanes, earthquakes and other disasters, but otherwise is relatively less risky for the insurer–medical insurance can reliably expect to pay out substantial sums every year for many people. More on this in the next post.