Friday, March 19, 2010

Insurance Reform Is Just a Red Herring

Americans have heard an awful lot of sales pitches from the Democratic Party to warrant the confirmation of the Senate healthcare bill, which recently passed into law in an historic and unprecedented vote. Historic because of the scope, and unprecedented because of the conniving manner in which the broadly unpopular bill found passage.

The most common theme in Democratic infomercials leading up to the vote was the assurance that the bill is designed as an attempt to reform insurance practice. But that just masks their true intention.

Propaganda campaigns in recent years have portrayed insurance companies as vampiric corporations that plot the demise of their policy holders for profit. Maligned as heartless villains that will not provide coverage to those with pre-existing conditions, insurance companies line their pockets with premium while the poor American people suffer unnecessarily. Obama’s plan will supposedly see to it that they reform their practices to run their insurance companies correctly and honestly, and that will solve all the problems.

But before we allow ourselves to believe that Obama’s goal is righting the wrongs of insurance companies, we should take a closer look at the practice of insurance.

Health insurance, like all insurance, is based on a gauge of probability called the “law of large numbers.” The stronger the likelihood someone will get sick, the higher the premium the person will pay.

Break this down to a base historical analogy. The insurance industry has roots in ancient Egypt, as people began to insure freight as it traveled on the Nile. If a merchant had cargo that he wanted to insure, any potential insurer must take into account many factors, including the cost of the cargo, natural phenomena like storms, distance traveled, and external factors like piracy. If a particular merchant was transporting a thousand pounds of gold 100 miles downriver, the insurer would require a large amount of money as incentive to insure the cargo.

Now ask this. Would it make sense to charge the same hefty premium to someone shipping a bag of clothes to the other side of the river?

Such is exactly what this healthcare bill offers. It will require that young Americans, who are less likely to get sick, pay higher premiums to compensate for mandatory reductions in premium to those who are more likely to get sick. This is the only way to compensate if there is to be any incentive to insure anyone, and it is entirely contrary to the idea of insurance.

Insurance companies cannot survive the government's plan, which by 2014 will disallow insurance companies to consider pre-existing conditions and mandate that health insurance be kept by all Americans. This will trigger a domino effect that will destroy private insurance.

Younger Americans will undoubtedly dislike paying increased premium for care that they do not receive. Yet this bill requires that they must have insurance, so they will have to go with the government plan. While insurance companies crumble without the offsets of younger policyholders, the government option will remain because it will not be hindered by such insurance constants as probability and profit margins. Profits and incentive to insure are trivial, because any financial shortfall in the government's plan can be reconciled by a seemingly endless pool of untaxed public revenue.

Insurance reform is not their aim. It is simply their expressed aim in the package they present to the public. This is because Americans tend to become tense when they hear the words, “universal” or “single-payer” healthcare. But “single-payer” healthcare is absolutely their goal.

And this should make Americans truly afraid. We have seen how such systems work. We have seen the fiscal drain on economies that employ them, and know about the necessity of rationing service and have heard about lengthy waiting periods for simple service.

Most Americans today like that their family’s health is more than just a number to healthcare providers, and enjoy quality service as a result of their payments. They shudder at the thought that one day a trip to the hospital could be remotely like a routine trip to the Post Office or DMV, where prominently cold, callous workers try to make it through the day, simply fulfilling their role as a government bureaucrat, stamping forms, and slowly processing the inconvenient requests of the masses.

But sadly this may be in America’s future, because this administration is cobbling the road to socialized medicine. They just choose less threatening verbiage and call it “reform.”

William Sullivan

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