Yes, It is Correct That Health Insurance and Income Redistribution Are Different Things

Writing at the Washington Examiner, Timothy P. Carney responds to the recent outrage over Rep. John Shimkus, R-Illinois, balking at being required to be buy maternity coverage when his wife is well past childbearing age.

Insurance is something completely different [from redistribution]. Insurance is about many people, who face uncertainty, pooling their medical risk. Uncertainty and risk are what make insurance make sense — you may face a cost, but you may not, and you don’t know the magnitude. If you know you won’t face a cost or you are willing to bear all the risk yourself, then opting out of insurance is reasonable.

Insurance is something completely different. Insurance is about many people, who face uncertainty, pooling their medical risk. Uncertainty and risk are what make insurance make sense — you may face a cost, but you may not, and you don’t know the magnitude. If you know you won’t face a cost or you are willing to bear all the risk yourself, then opting out of insurance is reasonable.

This is quite right, and hits at the fundamental problem with what we call “health insurance” in the United States. By effectively mandating employer-based coverage through the special tax benefits provided to employers but not individuals, and by loading those employer-provided plans up with various mandates, we end up with looks very little like “insurance” and becomes instead an extremely inefficient system of pre-payed care.

The fundamental premise of insurance is one of risk management. Taking the example of an insulin-dependent diabetic, it makes perfectly good sense for them to have an insurance arrangement to cover possible hospitalizations, or other catastrophic complications.

It makes very little sense, on the other hand, for our diabetic to pay for their routine daily insulin through the insurance model. But because of the combination of regulations and mandates, that is the situation most Americans find themselves in: paying out the nose for routine care, because they are paying to have “insured” risks whose known probability is 100 percent.

This is an unpopular assertion because people are so used to the idea that any kind of healthcare not covered through insurance becomes catastrophically unaffordable. Yet it need not be that way.

If we allowed markets to work, routine care could be covered out-of-pocket at affordable, competitive prices. This would leave health insurance to its proper purpose– mitigating the risk of extremely expensive catastrophic care.

(Image from Pictures of Money used with permission.)

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The Jack News brings a fresh pragmatism to our political world. We are committed to freedom, common sense, and choices beyond nationalism and progressivism. We want smaller government and more individual liberty.

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