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Posted: March 20, 2012

You lost me at “insurance”

Seems to be the place where health care views diverge

David Sneed

I’ve never really understood health insurance.

I pay State Farm $100 every month so that if I wreck my car I can afford to have it fixed. They take my premium and hope that either 1) I never have a claim, or 2) the amount of my claim is less than the money I put in.

And that’s how the business of insurance works. There’s a good chance that I’ll never use the money I pay in premiums. If I don’t, they can buy a new jet ski - or whatever insurance companies do with their loot.

One thing I don’t do is call them every time something happens. If I notice a scratch on the bumper, I don’t call State Farm to fix it - even though they would. First of all,  I have a deductible which leaves some of the responsibility on my shoulders and, secondly, I’m afraid that my premiums will rise if I use my coverage too much. I’m willing to foot the bill for some touch-up paint to keep my costs down.

My house is the same way. I have the insurance not to fix the gutters, but to save my investment from a catastrophic loss that would ruin me.

So I look at health insurance and see that it isn’t like my other policies at all.

Since I belong to a group, my premiums don’t rise no matter how much I use it, and I feel that if I don’t use it I’m wasting my money. “I’ll just go get it checked out, it’s free.”  This is the touch-up paint we’d normally pay from our own pocket.

I also don’t have a deductible, or if I do, I only pay it once a year. This means that I can just go in and, for a small fee (a fraction of the real cost) I can have a doctor tell me that it’s just a cold and I should drink some orange juice.

The most obvious difference between my health insurance and my homeowner’s policy is that my house probably won’t burn down. If it does, the company will pay me for it. Not just out of my premiums (which total less than the cost of a new house,) but also out of the premiums from those who don’t suffer a house fire.

Contrast that with health care. You can be sure that you will use it, and that the amount you use over your lifetime will probably exceed what you’ve paid in premiums.  But unlike other insurance, there are no non-users whose premiums cover your loss. Everyone who has health insurance will eventually use it.

So I have an essentially free service I end up overwhelming with the demand that my every symptom be checked out, and that leads to a shortage of supply driving up the cost. The insurance companies see this happening and realize that premiums must rise because I’m using more than I put in.  I can’t say I blame them.

Using the word ‘insurance’ might be skewing our perception of what it really does. It might be better if we call it pre-paid health care instead. At least then we can discuss the subject from the same definition. That being said, we really have only two options.

We can decide that those who have the sense, health, and money to buy coverage are protected while those who don’t are thrown to the wolves; or we can decide that everyone needs coverage, and we all agree to pay an equal share.

In 2009, the U.S. spent $2.5 trillion, so your portion is $673 per month. A family of four owes $2,692 every 30 days, and for that you guarantee coverage for all 310 million of us.

What we have now is the third option where some of us pay nothing, some pay something, but none of us pay the actual cost.

Here’s the part that bugs me. I’ve yet to meet someone demanding universal coverage who’s willing to pay $2,692/month for the privilege, nor have I met a privatization proponent who believes only the wealthy deserve health care.

Since both sides want an actual solution, let’s find the place our opinions first diverge – and I think it’s at the word “insurance.”

David Sneed is the owner of Alpine Fence Company,and the author of" Everyone Has A Boss– The Two Hour Guide to Being the Most Valuable Employee at Any Company." As a Marine, father, employee and boss, David has learned how to help others succeed. He teaches the benefits of a strong work ethic to entry and mid-level employees. Contact him at  David@EveryoneHasABoss.com

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Readers Respond

One area David misses is that many people do not have their insurance paid for by their company as he obviously does. My wife and I pay ~$14K per year for an insurance policy with $10K deductible. We certainly do not see the doctor except when absolutely necessary. Perhaps if companies no longer offered subsidized to free health insurance, more people would appreciate the true cost of our health care and we would find more creative health insurance options. By Wayne Farlow on 2012 03 30
another big difference between car insurance and health insurance is that the car repair shop gives you an itemized list of costs and services prior to providing the service. Doctors and hospitals still refuse to do this. Instead, they randomly order as many fee services as possible to rack up their incomes. These fees are artificially inflated and then the consumer ends up paying 20% or whatever your plan terms require. If doctors were required to give you an estimate and tell you exactly what they are charging you for beforehand, this would change the landscape and overall health care costs would plummet. By liz on 2012 03 30
they won't. too much government control and too much money being contributed to this administrations re election By John C Wray II on 2012 03 22
I agree, Mr. Layton, these are great comments. I only hope that those who have the power to change the status quo are also reading your words of wisdom. By Snow White on 2012 03 22
Great comments from everybody on an important subject. Messrs. Walker and Burt both made good points in responce to my post. Thanks for the discussion, and I hope this kind of thinking catches on. By Rob Layton on 2012 03 21
David, thanks for this article. I agree! To Mr. Layton's point, I also don't understand why employers are in the middle, Employers do not buy home/ auto ins for our employees-why healthcare? That concept seems broken because as others have noted not everyone has an employer. If all personal health insurance was purchased by people, it would be easier for individuals. I'm open to the universal debate, and open to user driven models, but get the employer out of the equation! Further, after decades of people not paying for healthcare we have this strange culture in the U.S. in which so many people blindly follow a doctor's advice since they aren't paying the bill. Doctors meanwhile can recommend nearly anything they want and drive revenue. People need to be actively involved in healthcare purchase decisions cost/benefit. By Scott Burt on 2012 03 21
We have free disocount perscription cards if anyone wants to pay less for their perscriptions! *We are happy to put a free display at your place of work as well! By Jason on 2012 03 20
Mr. Wray, The ACA will actually cost an infinite amount of money if you push the projection out to an infinite time period. The CBO does 10 year projections. It's what they do. http://www.cbo.gov/publication/43104 Mr. Layton, While there is some truth to what you say, there remains a large portion of the population which is not covered by employer healthcare nor by government healthcare. As a member of that group, I can tell you that: 1. It's hard to compare plans, and 2. It's hard to find reasonably priced plans (or it was until the ACA put a directory online), For the uninsured, the big problem is that insurance companies have negotiated discounts and enforce them. The people who can't afford health insurance therefore get charged the highest rates, and doctors who try to help them out risk getting kicked out of network. Per-HMO, health insurance acted just like car insurance. By Ryan Walker on 2012 03 20
Hallelujah! You GET IT! There is no free lunch in this country! Health Care certainly won't go down - in fact - my bet is that most costs will go dramatically higher! By Karen Harrison on 2012 03 20
David, the big difference between your car insurance and health insurance is that when you buy car insurance YOU get to choose which prduct to buy and which company to purchase it from. It is a consumer product driven by the free market. Health insurance is not a consumer product. If it was, you would be able to choose from a variety of products and find one that suits your needs at a reasonable price. Health insurance is a business to business product. Remember when computers were a B-to-B product? They were huge, clumsy, and expensive, and they would still be that way if they had not become consumer products. If we got employers (and I'm one of those) out of the health care business, prices would drop and services would improve. By Rob Layton on 2012 03 20
outstanding article. The CBO now estimates that the "cost" of obamacare will be THREE times what they estimated. Is anyone surprised?? This system is nuts By John Wray on 2012 03 20
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