Health Insurance Compared To Auto and Homeowners Insurance
Why in the world is it so difficult to manage health care costs? Why does it cost thousands of dollars for an overnight stay at a hospital, hundreds for a few stitches, and hundreds of thousands for major life saving surgery?
Why can’t it be more like auto or homeowners insurance? Surely if you total a fifty thousand dollar car, your insurance company will replace it, less whatever deductible you may have. You are even covered for medical expenses up to your/their limits will pay. That could cover the same costs for major surgery, by why are the premiums so different?
Casualty insurance – homeowners’ and auto insurance, for example – is different. In the casualty market the product being bought and sold is real insurance, providing protection against unanticipated catastrophic loss.
Homeowners insurance, for example, typically pays for losses due to theft, wind, hail, fire and so on. But it doesn’t pay for the normal wear and tear of daily living, such as replacing worn-out carpet or repairing a leaky faucet or an air conditioning system that’s on the blink. Similarly, automobile insurance pays for collision damages, but it doesn’t pay for oil changes, new tires, tune ups or normal maintenance.
Health insurance is different. The typical employer plan, for example, covers general checkups and such routine screenings as mammograms, Pap smears, and PSA testing for prostate cancer. These may all be worthwhile tests, but they are not the result of some unpredictable, costly event.
In addition, many health plans cover the full cost of such tests, with no deductible or co-payment. Under the Affordable Care Act, first-dollar coverage for routine primary and preventive care is required by law.
The perverse nature of health insurance goes further. Many employer plans that provide first-dollar coverage for routine care at the same time leave employees exposed to tens of thousands of dollars of out-of-pocket expenses in the case of catastrophic illness. In other words, the policies pay for routine expenses most families easily could pay themselves, but leave the families exposed to large bills – and possible bankruptcy –in the event of a major accident or illness.
Another unique feature of health insurance is the degree of control insurers have over the services that are provided.
If you’re in an automobile accident, you typically take your car to an approved auto body shop. The insurance company doesn’t tell the auto body shop how to make the repairs, it merely pays for the loss. Similarly, if your house is destroyed by a fire, the insurer doesn’t insist that you rebuild it exactly as it was; it writes you a check for the value of your loss.
Modern health insurance, by contrast, doesn’t write checks based on loss, it writes checks to doctors, hospitals and other providers based on the services they provide. Instead of reimbursing for losses, health insurance pays for consumption – and the amount it pays depends on how much we consume.
The insurer’s job, in other words, as the agent of a third party payer, is to limit the payer’s financial liability by rationing care and limiting what they pay to doctors, hospitals, diagnostic facilities and other providers.
Homeowners’ insurers are not in the home repair business. Auto insurers aren’t in the car repair business. And health insurers shouldn’t be in the business of prescribing – or proscribing – medical treatment; they should be in the business of insuring individuals and families against large financial losses owing to medical conditions.
Like homeowners’ and auto insurance, health insurance should have a limited purpose: providing protection against financial loss. Medical decisions should be left to the experts. read more:
And that my friends is why Obamacare will not work. As a matter of fact, it’s doomed for failure, as we have learned with other programs ran by the bureaucrats in Washington, they couldn’t run a gas station let alone six billion peoples healthcare.
