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Friday, February 4, 2011

Oldie but Goodie

K. McCaffrey --- The grandfather of classical liberal policy institutes, the Foundation for Economic Education (FEE), is a wealth of great resources for the liberty-minded. One of my friends reposted this article from 2003 in their journal, The Freeman, that puts, in very simple terms, the dilemmas that the structure of health insurance leads to. Many of the points Szasz brings up in his article were not even addressed during the healthcare debate:

The typical contractor of health insurance is not the insured person but his employer. Neither party is free to negotiate the terms of the policy. The employee cannot bargain for a lower premium in exchange for a high deductible or for choosing to be not covered for alcoholism or schizophrenia. The employer is not free to decline coverage for state-mandated medical services. In New York State, for example, the Women’s Wellness Act mandates group health-insurance plans to cover contraceptives including abortifacients, and the Infertility Coverage Act mandates that they cover infertility treatments, including selective fetal reduction (abortion of multiple fetuses conceived by artificial means).

The economic survival of an insurance company depends in large part on collecting more in premiums than it pays out in claims. To bring about that outcome the insurer employs certain methods, some complicated, some very simple. Although embarrassingly obvious, some of these simple measures need to be mentioned because they are absent from what we mislabel “health insurance.” For example, a person cannot buy a policy to protect himself from a loss caused by his own actions, such as burning down his own home. But so-called health insurance protects the individual from the medical consequences of his own actions, for example, injuring himself by smashing his car while drunk. Not surprisingly, all the participants in the complex scheme we call “health insurance” are unhappy with the result.

In the case of genuine insurance, there is a direct relationship between the dollar value of the protection purchased and its cost to the insured. The premium for a life-insurance policy with a face value of $100,000 is less than for a policy for a multiple of that amount. In health insurance no such relationship exists between premium paid and compensation received. Moreover, the health-insurance company, acting on its own behalf, can write a contract with a “cap” on claims, that is, for the maximum amount it will pay the insured, regardless of the health-care cost he incurs. The insured person, who typically does not act on his own behalf but is “provided” insurance as an important part of his job benefit, has no reciprocal options.

Anyway, I really liked the whole piece, with the exception of some of the random historical comparison at the end. Hopefully I will have to worry about purchasing some form of healthcare within the next six years (as that will entail the repeal of that portion of the Obamacare mandate).

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  1. We depend solely on our small business for survival, so we pay 100% of the cost of our insurance. You learn a lot when you are not getting a contribution from an employer. It is easy to overlook the total expense when your employer contributes a significant amount. Due to this high cost I wish that I could pick a plan that covered only the things that my family needs. For example, I am not planning on getting acupunture anytime in the near future so I would prefer it not be in my plan. Also I don't want to be in the same pool of people that get abortions. Another way to reduce costs in my ideal insurance pool would be to have a voluntary drug test. I would gladly volunteer for such a test, if it allowed me to be in a separate pool than people who CHOOOSE to do drugs. Since my family pays $12,000 per year for insurance and that does not include vision and dental, I would really appreciate having options such as these to reduce costs. My dream insurance is illegal though isn't it? Shouldn't I as the consumer be able to make these choices for my family?

  2. Company Paid Health Insurance is Part of Your Salary

    People are already personally paying for their "employer-paid" insurance. They don't buy it directly so (1) it doesn't attach to them when they change jobs, (2) and they can't shop for the insurance they might want. The employer writes the check with part of the money earned by the employee.

    Untangle the tax mess, remove employers from the middle, and salaries would go up in the amount of the "free" healthcare benefit through employers. Then people would have enough take-home pay to buy their own health insurance. That is what healthcare reform should be about, along with removing anti-competitive rules from the insurance market.

    - -
    Why are health insurance rates going up faster than inflation? An analogy.
    Health Insurance Thirst Mandate

    === ===

    His Benevolence: I have decided to banish thirst from the land. All health insurance will henceforth include unlimited purchases of refreshing drink, like Coke, Pepsi, and 7-Up. The peasants will slake their thirst and be reimbursed by the insurance companies. No co-pay.

    Advisor: Your name will be legend. But Sire, will you be paying for this bounty?

    His Benevolence: The insurance companies will pay.

    Advisor: Sire, the peasants will have to pay the insurance companies.
    === ===

  3. From the latest issue of Regulation Magazine from Cato:

    "In Medicine, Money Matters
    Real health care reform would change incentives"


  4. all insurance is a gamble. you buy it gambling on the fact the costs of your medical bills will be higher than it would be if you paid the bills out of pocket.