HEALTHCARE AND AUTO INSURANCE COMPARISON – IT REALLY IS EASY TO MAKE A CHOICE

FINDING, AND COMMITTING TO, PURPOSE

Healthcare in America seems complex, complicated and interrelated but making a decision about supporting or not supporting Obamacare is very simple.

“If you have a house, insure it. If you have a car, insure it. If you have a body, insure it”

Anonymous

• HEALTHCARE FIRST, THEN FINANCING APPROACH –If you believe that all of our citizens need health insurance, then you are for it, and will work to reduce overall costs. The US can be very successful reducing costs because costs are so high overall; there is enormous room for improvement. For example, Medicare is very efficiently run, does not experience huge, annual rate increases. This is a decision about our country’s values and is an example of the kind of country we want to be. We can afford healthcare either way.

• FINANCING FIRST, THEN HEALTHCARE APPROACH — If you do not believe that our citizens need healthcare, then you are willing to go back to the way it recently was. Then people with pre-existing conditions were not insured, people were going into bankruptcy because of health care bills and millions of people were without routine care costing society dearly. This approach sees healthcare a financial decision first, not a healthcare decision. We can afford healthcare either way.

 

GETTING TO A COMMON UNDERSTANDING OF HEALTH CARE INSURANCE ISSUES

A common understanding of how health insurance works will enable us to start a discussion of Obamacare on the same page. Spoiler alert — the real cost culprit is that health care in America costs far too much, way more than in other countries with worse outcomes but that is for another day.

Summary of the Affordable Care Act (ACA) or Obamacare

In 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law. It prohibits insurance companies from denying coverage to patients with pre-existing conditions, and allows children to remain on their parents’ insurance plan until they reach the age of 26. In participating states, the act also expanded Medicaid, a government program that provides medical care for individuals with very low incomes. In addition to these changes, the ACA established the federal Healthcare Marketplace. The marketplace helps individuals and businesses shop for quality insurance plans at affordable rates. Low-income individuals who sign up for insurance through the marketplace may qualify for subsidies to help bring down costs.

An unpopular aspect of the ACA is that all Americans are required to carry medical insurance that meets federally designated minimum standards or face a tax penalty. In certain cases, taxpayers may qualify for an exemption from the penalty if they were unable to obtain insurance due to financial hardship or other situations. Two public health insurance plans, Medicare and the Children’s Health Insurance Program, target older individuals and children, respectively. Medicare also serves people with certain disabilities. The program is available to anyone age 65 or older. The CHIP plan has income limits and covers babies and children up to the age of 18.Investopedia on Facebook

 

COMPARE AUTOMOBILE INSURANCE TO HEALTH CARE INSURANCE

Comparing healthcare insurance features to automobile insurance features is an easy way to begin as most do have car insurance. Almost all of us carry automobile insurance and know how it works.

SUMMARY COMPARISON TABLE

 

	AUTO INSURANCE	HEALTHCARE INSURANCE
	REGULATION REQUIRED — Everyone is required by law (also known as regulation) to carry auto insurance, if they drive. If you don’t drive, you don’t have to carry insurance. And the insurance covers the car, not the driver, so if a driver with no insurance drives a car that is insured, the driver is covered.	REGULATION NOT REQUIRED – Before Obamacare, everyone was not required by law (also known as regulation) to carry health insurance. The size of the “insurable” pool shrinks if people choose to opt out.   However, hospitals are required by law to provide care so there is no way for society (insurance companies etc.) to escape paying for the health care for a person who needs emergency care. For uninsured people, we can deny them regular routine care because they have no insurance. However, there are many studies that indicate that we pay a very high societal cost for not taking care of children and unhealthy people.
	SHARED COST — We all pay a little bit, an affordable amount, to drive our cars and be covered.	SHARED COST – In both employer sponsored and government plans (Obamacare, Medicare, Medicaid) we all pay some amount. To the extent that there are many people that are not insured, all of the rest of us pay more. This is the underlying concept. We all pay something to take care of our citizens. Then, when and if we need care, there will be service for us. There are lots of terms for this kind of sharing.
	SPREAD RISK OVER BIG POOL — The pool of drivers is known, predictable and their driving behavior is tracked. The pool of cars, what is actually insured, is known with certainty. Therefore it is easy for insurance companies to set rates and make a profit.	SPREAD RISK OVER SMALLER, RISKIER POOL – To the extent the pool does not include healthy people, the costs are higher for the government/insurance companies, the cost to us individually is exorbitant and all is unpredictable.
	UPPER LIMIT OF COST PREDICTABLE — The insurance company cost or loss is somewhat limited to the cost of the car and the medical injury expenses. This makes it easy for insurance companies to estimate the upper limit of potential loss.	UPPER LIMIT OF COST NOT PREDICTABLE – This is a huge factor and one of the biggest differences between auto insurance and health care. The cost of care is very unpredictable and can be literally in the millions for one person. It does not take many of those claims to break the bank. And it is not easy for an insurance company to predict the upper limit of potential cost.
	DISCRIMINATION NOT PERMITED NOW — Insurance companies used to charge different rates for men vs. women because women are safer drivers but it was determined that was an unfair, discriminatory practice so now everyone is charged the same amount.	DISCRIMINATION NOT PERMITTED NOW – Health insurance companies used to charge different rates for men vs. women because women have more health care costs, usually pregnancy etc. related, but it was determined that was an unfair, discriminatory. Making women pay more for health care seems fair to some people because women cost more while others do not believe that it is the individual woman’s responsibility for having higher health care costs. After all, we all benefit from children.
	PUNITIVE PRICING ALLOWED — Insurance companies are allowed to charge more for people who have bad driving records, an activity that is well within a person’s control.	PUNITIVE PRICING NOT ALLOWED – For years, insurance companies were allowed to deny health insurance to people for pre-existing conditions and this was the major way they limited the pool to healthy people and did not have to insure not healthy people. Coverage could be denied if you had high cholesterol and nothing else wrong with you. Now, a person cannot be denied insurance for a pre-existing condition. This has saved many people’s lives, without a doubt.

 

The insurance principles are the same with health care. Insurance companies are looking for the biggest possible pool in order to spread the risk of loss. As with auto insurance, the insurance companies want a large group of people where most of the people will pay an affordable amount and not use benefits.

The insurance company expects accidents and claims so expects to pay on high risk people, including those with pre-existing conditions (sort of like being a bad driver). This is the major reason that everyone is required to pay something under Obamacare. The pool needs to be large enough include healthy people to offset the cost of not healthy people. The reasoning is that as one ages, one will become “not healthy” and need more care. So when that person is older, they will have the benefit of young people subsidizing the cost of the older person’s health care.

 

AUTO INSURANCE AND HEALTH INSURANCE ARE ALIKE IN SOME WAYS AND DIFFERENT IN OTHERS

• With auto insurance, a person has a consumer choice to make, they can opt out of driving and avoid paying for care insurance. With health care, when you need it, you need it and cannot opt out of it. And when you need it, you don’t have time to shop around, make an informed decision, save up for the treatment etc. This is not a typical buying consumer choice.

• Some politicians, who do not want government healthcare, like to present health care as a buying decision, like buying a car, socks, dinner out, or a haircut. It is not that kind of buying decision but the idea does fool people.

• Some politicians also like to pretend that you are getting a lot of choices and that competition will drive the cost down. This doesn’t happen either. Usually there are very few choices, people have no idea how to analyze their choices and cannot take advantage of choices because they are too far away or too expensive.

• There is very little “free market” in healthcare. A few big players exerting enormous monopoly power dominate this industry, from the insurance side and the provider/hospital side. In the history of health care, existing competition has not reduced the cost of overall healthcare and certainly not the emergency and high cost care. It has become even more expensive.

 

CONCLUSION

Taking all these factors together, it is impossible for an insurance company (in this hybrid environment) to provide affordable health insurance that will cover everyone that needs healthcare. The only way we can achieve affordable insurance and widespread coverage is for the covered pool to include enough healthy people, who don’t need much care, to offset the cost of care for the not-healthy people, who do need a lot of care.