When is insurance NOT insurance?

The answer: when Senator Obama is calling the shots.

I think you're all aware that, despite my recent saga in which I explored my political leanings from a big picture perspective, I have done my best to stay largely insulated from the barrage of coverage surrounding the 2008 Presidential election. There are a number of reasons for that. First of all, I already know enough of about one of the major candidates (Senator Obama) to know that I will NOT be voting for him. Secondly, media political coverage generally just makes me simultaneously angry and depressed at the state of politics in America. Thirdly, you don't really learn that much from the standard media coverage anyhow. The fact of the matter is that at some point in the next couple weeks, I will conduct my own thorough examination of Senator McCain's record and proposals and determine whether I can bring myself to vote for him or not - at the present I'm leaning toward yes. If the answer is no, I will then explore the 3rd party candidates that will be available to me, and if I can't vote for any of them, I will spend some time brainstorming the most amusing option for a write-in vote. I trust it won't get that far.

But you can only insulate yourself so much if you aren't willing to forgo all traditional forms of media for months on end. And for the last several weeks, I'd been hearing an ad for Senator Obama with a piece in it that I couldn't believe was actually intended to mean what it said. So finally, this evening, when I got home, I went to Mr. Obama's website and did some quick searching. And there, as one of the points in his health care reform platform was this statement, that his plan would: "Require insurance companies to cover pre-existing conditions so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums."

Since I'm posting about this, you're probably assuming that I disagree with this portion of Mr. Obama's plan. And you would be wrong. I can't disagree or agree with it, because it's complete and utter nonsense. And I don't mean nonsense as in wrong or mistaken, I mean pure gibberish. This is the political equivalent of "goo goo, ga ga".

You CAN'T insure against a pre-existing condition. It's just not logically possible. You can only insure against an event up until the point at which it actually occurs. Once it does occur, all you can do is deal with the consequences. Let's make some real simple comparisons here. This is the equivalent of signing up for a car insurance company to sign you up today and then pay for the accident you had last week. It's the same as buying flood insurance and expecting coverage for damage from the hurricane that came through a month ago. Try going to a life insurance company and taking out a policy on your grandmother who passed away yesterday. The laughter will be good for your agent. If you want milder examples that still illustrate the point, change it to getting flood insurance with the waters already rising towards your house, or getting life insurance for a death row inmate who has a death warrant signed for tomorrow. If something has either already happened, or is a certainty, you can't insure against it - period.

I'm sure you know generally how insurance works, but I'll give a quick refresher anyhow. You go to a company and ask them to agree to cover the expenses if event A happens. The insurance company then crunches the numbers based on the likelihood of event A happening, how much it would cost to cover the expenses, etc and comes back to you with a premium. They are playing the percentages that even if event A happens to you, they'll make more than enough money from those for whom event A does not occur to meet their agreements to you and continue to make a profit. That's why it's more expensive to get homeowner's insurance in a flood, hurricane, earthquake, wildfire, etc zone, because the likelihood of the dreaded event A is much higher. Insurance is all about risk, the more risk the insurance company has to assume, the more you have to pay,m and vice versa. Most people come out on the short end of this deal over time, meaning they pay more in premiums than they ever receive in benefits. This is self-evident, because if it weren't the case, the insurance industry wouldn't exist.

So, if someone with a pre-existing condition A comes and wants insurance to cover the treatment for condition A, the probability of condition A occurring, is of course 100%. So, if the company is required to cover the treatment for condition A, then they are not, in fact, insuring the person against condition A, they are becoming a middle man and providing a payment program from the treatment of condition A. Which makes their costs equal to the cost of the treatment from the provider, plus whatever administrative costs they incur. So, in order to maintain a viable business model, the company has 2 choices: #1 - They can either simply pass the cost of the treatment and their administrative costs over to the customer in the form of premiums that will cover both entirely. Of course, this makes zero sense to the consumer, because they are now paying more for the plan than it would cost them to pay for the treatment. #2 - They can subsidize the cost of paying for this treatment by increasing the premiums of clients who do not have pre-existing conditions, which means that everyone else is now paying for their insurance, plus a portion of the cost of the pre-existing condition payment plan the company has to offer.

So, like I said, I can't agree or disagree with this part of Senator Obama's health care plan, because it's not possible to insure pre-existing conditions. You can call it that all you want, but it isn't what is actually happening. Now, what you could do is require insurance companies to offer payment plans for treatment of pre-existing conditions that are subsidized by the profits from their insurance plans. That's actually possible, and accurately represents what is being required. It's also the same thing as mandating that apple orchards to start to grow oranges and sell them at less than cost using the profits from the apples, which is why no one is ever going to call it what it is, but that's beside the point (sort of). That is, however, a proposal I can agree or disagree with, and not total gibberish. Another proposal that is similar and at least possible is to require insurance companies to insure individuals for treatment of conditions which are made considerably more likely due to a given pre-existing condition. I would disagree with that as well, but again, it's at least something you could do in theory. The same is true of socialized medicine where you just have the government run/pay for everyone's health care.

So, don't be deceived - Senator Obama does not have a plan to insure pre-existing conditions, no matter how often he says it! Oh, and by the way, Senator, another piece of your proposal gives a goal of reducing health care costs for employers. Requiring insurance companies to take on guaranteed new expenses strikes me as counterproductive to that goal. To be fair, having done some corresponding research on Senator McCain's plan, I'm not totally on board with it either. I like the general direction, but I don't think it goes far enough.

In the near future, I will lay out my own solution to the health care issues in this country. Okay, it's not my own, I saw it on TV, but I really liked it! The difference between it and the plans you're going to hear from any national candidate is that it will actually attack the core of the health care problems in this country, rather than just putting a band aid over them by giving people extra money towards their insurance in one fashion or another. And the reason you'll never hear a major candidate run with it? It's not a quick fix, there will be an adjustment period that will be quite painful for a number of people, and there's no way to sugarcoat that fact. Such realities are generally not popular in today's American society, and thus promoting such a policy is not conducive to winning an election.