Tuesday, April 1, 2014

Why I don't believe in insurance

Like people who play the lottery, people who buy insurance are basically innumerate (i.e., mathematically illiterate). In both cases, what you are doing is paying a middle man who skims a portion of the proceeds off the top, and then distributes the remainder to the participants. In the case of the lottery, the amount skimmed off is 50% or more; with insurance companies it is somewhat less but the principle is the same.

A further problem with insurance is that you are placing a bet that something bad is going to happen to you. In the case of life insurance, you are betting that you're going to die; if you live, you've lost the best. With disability insurance, you are betting you are going to become disabled; if you don't, you lose the bet. With health insurance, you are betting you are going to get sick or injured; if you don't, you lose.

What this amounts to is that you are subsidizing those folks who engage in risky behavior, whether it be smoking, not wearing your seatbelts, or whatever. If you have the good sense to make a reasonable effort to take care of yourself, you are making a really losing bet, over and beyond what the normal person makes when he/she buys insurance.

The obsession with insurance which has developed since World War 2 represents the decline in community during this era. People who are part of a community do not need insurance, because they know that the community will step in to take up the slack. The essence of community is a group of people who are committed to the idea of bearing each other's burdens; hence, no need for insurance.

A recent book about the experience of the Hutterites in World War One, called "Pacifists in Chains: The Persecution of Hutterites in the Great War", describes an odd consequence of the sense of community existing among the Hutterites. The book describes the experiences of four Hutterite men who were conscripted into the military during WW1. As husbands and fathers, they could have easily avoided conscription by simply checking the box that they were the "sole support" of their families. But, with scrupulous honesty, they failed to check this box, because they knew that the community would take care of their families in their absence.

A particularly outrageous example of how insurance companies spend the money they skim off the top from our premiums is seen in the exorbitant amounts that car insurance companies are paying for advertising in recent years. The TV airwaves are saturated with this advertising, which is especially inexplicable in light of the fact that the requirements for a basic car insurance policy are mandated by state law in every state. Every day we see these ads: Progressive (Flo and her "name your price tool"), Geico ("fifteen minutes could save you fifteen percent or more on car insurance"), State Farm ("like a good neighbor, State Farm is there"), Allstate (you're in good hands with Allstate),  Farmer's ("we are Farmer's"), Safeco ("some people want more out of life"), The General ("Go to The General and save some time"), (esurance (poking fun at Geico's "fifteen minutes" jingle by saying it only takes seven and a half minutes with esurance), and, most bizarrely, USAA ("Once it's earned, USAA auto insurance is often handed down from generation to generation").

The purpose of this post is not political, but I can't help observing that Obamacare is a pathetic attempt at reform, relying as it does on the private insurance system. True reform will not come in the U.S. until Congress decides to join the rest of the developed world in providing health care to all.

 The absurd situations which arise when the private insurance system and private employers are involved is represented by the Hobby Lobby case, which was recently argued before the U.S. Supreme Court. Hobby Lobby argued that its religious liberties were being violated by being forced to cover contraception in the health insurance plans provided to its employees. This position is laughable on a number of grounds.

But consider the larger question, presented by the thrust of this post. Why should health insurance plans cover contraception? Insurance, if it has any legitimate role at all, should be used to protect us against catastrophic events. Just as we don't expect our car insurance to pay for routine oil changes, neither should we expect our health insurance to pay for routine body maintenance. When I learned that the contraceptive coverage in question was available for as low as $9 a month, this made the Obama Administration's position seem awfully weak on the coverage issue.


MakeCulture said...

Actually, including contraception in the plan often is available for free. When Hobby Lobby and others first complained about having to "pay for someone else's birth control", the insurance companies responded by offering it for free. They knew that that paying less than $10 a month for birth control was actually cheaper than having to cover the really high costs of child birth. Hobby Lobby then still threw a fit.

Well, the issue with the contraception isn't the money. The issue is the principle that, once we accept that we have a private health care system that covers medicine, do we allow insurance companies to cover penis pumps and viagra, but not the birth control pill. Congress decided that we, as a society, will not allow that.

chessart said...

I still maintain that is is ridiculously inefficient to expect the pharmacies to submit an insurance claim for a $9 prescription, then have the insurance company process the claim and decide if it is payable, compared to the simple matter of plunking $9 down on the counter for the prescription. You are introducing two layers of red tape into what should be a simple transaction.