I’ve talked about this before but why don’t people understand insurance? There are only two ways of making money in the insurance business. Either you make money by taking the premiums and investing part of them or you make money by paying out less than you take in. That’s it.
It doesn’t make any difference whether you’re talking about health insurance, fire insurance, or earthquake insurance. The principles are the same.
With the condition of the market there’s no way most insurance companies are going to make money there. So I think we’d better expect that premiums are going to rise, especially as costs go up.
Indeed. And an obvious variant of your observation. Why is anyone surprised at the escalating costs of health “insurance,” when its not really insurance?
To no avail, I have asked people: If your homeowners insurance didn’t just cover disasters – fire, wind and water damage – …….but instead covered mowing the lawn, watering the lawn, painting the house, repairing roof shingles, planting the garden, replacing the water heater, or air conditioning unit………would you be surprised if your homeowners insurance premiums went through the roof??
Health care coverage isn’t a pooled risk in case of rare disaster concept anymore, its a push every conceivable cost off on someone else concept. It is no longer “insurance.” And as you point out, if not a pooled risk concept, how do you make money? You can’t, unless premiums go up, and up, and up……..
The results are predictable. Any ECON 101 student could predict them. Except Obama, I guess.
The problem in healthcare is that people don’t want insurance. They want a maintenance contract and those are prohibitively expensive, especially when you consider the abuse that’s heaped on what’s being maintained.
As to President Obama, I’ve been complaining for some time that there are no signs he’s ever taken an economics course.
I remember an employee complaining that our employer-sponsored health care plan didn’t have a pregnancy benefit. I got quotes for policies with the benefit, and she nearly went through the roof. The increase in the annual premium was more than what the hospital quoted for a normal pregnancy. She was outraged, and as I recall the conversation went something like this:
Why do you want pregnancy coverage?
I hope to have a child soon.
What are you going to do with your coverage after you give birth?
Drop it.
Do you see the problem here?
Insurance companies are partially to blame. Some of their products look more like annuities than pool risk protection. Like funeral insurance.
“The problem in healthcare is that people don’t want insurance. They want a maintenance contract and those are prohibitively expensive, ”
Amen.
I rest my case, yer anner……………….
As to President Obama, I’ve been complaining for some time that there are no signs he’s ever taken an economics course.
He certainly doesn’t know what a P/E ratio is….