Edited to Add: Welcome Instapundit Readers! I apologize if I am slow approving comments today, but I’m glad you stopped by.
I paid two bills this past week, one for car and rental insurance, and one for health insurance. They are both called “insurance” but how they are seen in popular thinking and on the news differs considerably. In both cases I get the sense that for 90% of the people I work with and talk to, or hear through the various media, exactly how insurance started and what it was supposed to accomplish are complete unknowns. Which is a little disappointing, because the history of managing risk can be fascinating in the right hands.
So how did this all start? It started with trade, especially long-distance shipping in the 1600s. Insurance and corporate stocks and bonds share a similar ancestry, in that the goal was to spread out risk in return for reward, or at least for not going past bankrupt into debtor’s prison or losing everything down to your shirt and smallclothes. A group of merchants and other parties with some extra cash on hand would pool their resources, each assuming a share of the risks of the voyage. In return they got a share of the income when the exotic goods arrived in the home port a year or so later. If the ship sank, well, no one had lost everything, although everyone lost a little.
Not long after, groups of people came together and pooled their resources for a similar but more personal purpose. As more and more English moved to the new industrial cities after the 1780s or so, they found themselves outside the family and parish-based relief system that had always helped the local poor and those who found themselves indigent. So they got together by neighborhood, or congregation, or by profession, and pooled a little money to help each other in emergencies, or to afford a luxury like Christmas goose. Goose clubs (see “Sherlock Holmes and the Case of the Blue Carbuncle”), burial associations, Working Men’s Relief Funds, they had different names and covered different things, but the idea was for a lot of people to contribute a little with the assumption that enough money would accumulate to help the contributors if, Heaven forefend, something terrible happened. You might call it mutual assurance, and a form of it exists to this day. My current health care plan is a membership in a variation on the mutual assurance group.
At rock bottom, that is what all insurance still is today: an enormous pool of people who pay in a little every month so that if something terrible happens they will get a lot back out. Sort of a gigantic rainy-day savings account, if you will, but managed by someone else.
What fascinates me is how people look at car/home/stuff insurance as being very different from health insurance in how it is used. Car/home/stuff insurance kicks in when something bad happens – a nasty wreck, a house-fire, someone breaks in and steals your computer and jewelry and your pocket-watch or stamp collection that is now worth $$$. You don’t tap your car insurance for new tires, even though they are necessary for health and safety, or for repainting the inside of the house after someone decides that brown and crimson really doesn’t work anymore, or that the wallpaper that came with the house needs to go because pink, pea-green, and screaming orange are so dated that archaeologists now use them to identify epochs with. No, you pay your premiums and are glad that nothing has happened, and (I hope) watch your premiums slowly drop over the years because you have NOT made a claim and you don’t live in a high-risk area.
Health insurance, however, has become a “pay for everything” fund. The media expect health insurance to cover a lot of things I consider optional: hormonal birth control that is not medically necessary, yearly physicals, mammograms (for those who need them), well-child visits and all those things lumped into “routine examinations and care.” And then they also expect the insurance pools to only ask for small contributions from the users, contributions that don’t cover the risk. With predictable results, especially once the federal government really got involved in deciding which kinds of coverage everyone needed and how it would be administered.
I say predictable, because it comes down to who is the customer? Who is paying for the insurance: the end-user or a second party? If it is the end-user, that being me, I can pick and choose what coverage I want. If I only want liability on the car because I’ve saved enough to replace it and its Blue Book value is so low that the first question on the claim form is “How much gas was in the tank?” I can do that. If I want “replace it with a new one just as fancy” coverage, I can get that. Ditto for house and rental insurance. But once I was no longer considered the customer for my health insurance, when I was informed that I had to have coverage for X, Y, and Z that I’d always opted out of because I didn’t need them or they didn’t apply to me (prostate cancer screenings, for example), either my policy was cancelled or the rates went up a goodly amount, or both.
And my care options plummeted to the point that I crossed my fingers and told my doctors “I’m self pay,” and if pressed “I’m between carriers” (which was true, alas, fairly often after 2012) and just paid out of my savings rather than mess with finding a physician who took my insurance (I’m not driving 150 miles one way just to have my yearly lady-bits check. No. Assuming I could find someone located that close who took Brand D insurance.) Tellingly, paying cash gets you a 20-25% discount on all services and fees that I’ve encountered thus far. Instead of complaining about the “high cost of health care” how about we complain about “the high cost of the administration and bureaucracy now associated with health care.” And the problem of no longer being the customers of record.
People need health insurance. A lot of people can’t pay out-of-pocket for serious medical bills, things like chemotherapy and joint replacement and catastrophic car wreck injuries. I’m all for health insurance. I’d like to have better health insurance. But if society views it as a “pay for all the things” service instead of a “pay for major events” pool, it’s going to be a mess. How do we shift the mindset of people about insurance? No idea. Well, I have some ideas, but that’s why I’ve never been asked to run for office and why I’m not in charge of the world.