Tell me how insurance that isn't health insurance works.
I think it is almost entirely different from what we call "health insurance" in the US, which is almost entirely dissimilar from what I think "insurance" means.
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It's kind of the same. You pay a company for a future promise that they will reimburse you for costs which may occur.
ReplyDeleteJason Corley And premiums based on what?
ReplyDeleteBased on the expected possible reimbursement and the expected number of people paying in. And the desired profit, within the regulatory framework.
ReplyDeleteSo, risk assessment?
ReplyDeleteThat is, if I am 16 then my car insurance costs more than if I am 40 because 16 year olds are more likely to have accidents that cost more than the deductible, meaning the insurance company has to pay out.
Right?
Speaking broadly, that's right. There are many factors that contribute, though. For example,in the case of a catastrophic accident, lifetime care for a 16 year old is more expensive than lifetime care for a 40 year old, because of the additional 24 years of "lifetime" one can expect to cover.
ReplyDeleteRight, so that's expected costs.
ReplyDeleteAnd the factors don't have to, for example, be something under your control the way your average speed is, or "under your control" like grades. They can be completely outside your control like age, so long as they are contributory to the expected costs.
Right?
Broadly correct, but there are exceptions from the regulatory framework of what you can and can't consider. This is where the ACA's pre-existing conditions provision fits in. Of course you would want to charge (for example) a cancer patient more for health insurance because you can expect a higher possibility of a need for a significant payout.
ReplyDeleteWho said anything about health insurance?
ReplyDeleteI'm specifically not asking about health insurance.
But, yes, this gets to my underlying point: health insurance isn't insurance in any meaningful sense. To be insurance, the cost charged needs to be based on the expected costs, such that a 16 year old is charged more for car insurance than a 40 year old.
ReplyDeleteWe don't do that with health insurance. Because its not insurance. It is redistribution.
And that's ok, but I really dislike that we call it insurance.
No, it's insurance. The chance that you'll get cancer (or other significant diseases) is higher for someone that's already had cancer, so it's expected that your future health care payouts will be more significant.
ReplyDeleteI mean, technically all insurance is redistribution. I'm not seeing a distinction.
blink.
ReplyDeleteReally?
For example, my work sponsored pool costs X. Let's claim it is $100 per employee. This isn't based on gender, age, smoking, weight, diabetes, cancer, or nothing else. These things affect the risk pool but they are distributed throughout the group.
That is: the cost of health insurance to the consumer is distinctly not based to me on any factor that would change the average payout.
Additionally, my "health insurance" pays for all sorts of predictable expenses. Including, but not limited to: seeing a doctor once a year, a huge chunk of my expensive allergy medicine, etc, etc.
That'd be like my car insurance paying for an oil change; it surely doesn't.
Instead, my car insurance is based on factors that correlate with payout, such that (over a long enough timeline), the in and out should just about balance for each individual; that's distinctly not the case for health insurance.
As a side note, I have seen car insurances that will cover things like regular maintenance. They are more expensive, generally, but they do exist. Usually for higher end vehicles from what I recall. It's not something that I really paid attention too as I wasn't interested. Effectively what we generally think of as car insurance is the equivalent of the "catastrophic coverage" health insurance that has been making some noise lately.
ReplyDeleteThis isn't exactly that, but it's car care for non-accidents.
coverhound.com - Do You Need Auto Repair Insurance?
William Nichols First of all, note that the reason to cost to you (through your employer) appears to you to be standardized is because of the regulatory framework. The way that you get that insurance is extremely specific to your state and the provider. "Open enrollment", etc. are ways to "smooth out" the differences in expected cost to a gigantic population. If you were to forego insurance through your employer and just go shopping for it you would find a very different experience.
ReplyDeleteSecond, the coverage of "expected" payouts like routine care is exactly the same as "expected" payouts for significant health problems - the percentage chance of the payout happening is just much higher. As Matt notes, you certainly can buy car insurance that will cover routine maintenance if you can find an insurance company that will sell it to you. But for them to want to sell it to you they have to believe there's a chance you won't use it (or you won't use it enough). Otherwise they can't make a profit on it - also there'd be no benefit to you - you could just pay for it yourself.
Your insurance doesn't balance out over time for you it balances out over time for everyone the insurance company is selling insurance to. In other words, my teeth are pretty decent, the people selling me dental insurance are gonna have a routine cleaning bill every six months and (as I age) the occasional filling or prescription gum treatment. My wife's teeth are a nightmare. They have to pay out thousands on thousands for her teeth, we hit the coverage cap with them every year by April. Me being a "good bet" helps them offset my wife being a "poor bet". It's not exactly a bet because it's averaged over thousands of people, but that's the idea.
It's all individual risk mitigation via pooling risk. House insurance? Individuals paying into a fund in case they need it, vs. the insurance company betting fewer payouts will be made than pay ins. Same for cars, vacations, businesses, anything else that uses "insurance". All of those things base those fees on factors that are essentially pre existing conditions. Honestly, to me, the main difference between health insurance and other sorts of insurance is that we consider health to be more or less a right where other things that are being insured are more about voluntary risk.
ReplyDeleteYeah, there are plenty of insurances that are non-catastrophic, that basically don't care at all about your individual risk factors. When I bought a fancy touch-monitor (back when those were fancy) while raising two toddlers, I bought Electronics insurance from State Farm for a couple of years, just for the peace of mind. They asked "How expensive is what you're insuring?" and I told them, and then I volunteered, "Also, I have two young kids, so that's maybe a factor of extra risk," and their response was (as best I recall years later) "Don't care. That all washes out in the pool. We don't track it. Some folks insure electric guitars that they then take on tour. You can't be more dangerous than them, and they pay the same rate."
ReplyDeleteMy home-owner's insurance pretty much doesn't care about the big trees over the roof. When a big branch fell on the roof and cost them a ton of money? They still didn't care.
Auto insurance is sailing-close-to-the-wind, no-frills, "tune the pool beyond any sensible actuarial standards" sort of fiddling. I get that it's most everyone's point of contact with the insurance system, but I agree with Matt that it's not the universal model.
I don't think we've had "health insurance" since the 90s. It's increasingly "health financing."
ReplyDeleteThe key difference between health insurance and car insurance is the payout scheme. In the car case, you basically get a lump sum, and the company that insured you when the accident happened is responsible for the whole thing.
ReplyDeleteIn the health case, consider something like diabetes. The diagnosis is a one-time thing, but the expenses recur for the rest of your life. Now, saying that the provider you had when you were diagnosed is liable to pay for insulin for the rest of your life is easy, but there's a whole slew of related issues that may or may not be caused by your condition. Who's liable for them?
In practice, it's the insurer you have when the payment is made, so insurers have a huge incentive to get people with chronic conditions of their lists and on to others.
Thanks, everybody!
ReplyDeleteI can't wrap my head around insurance that covers known bills, since insurance provides probablistic coverage.
Either way, I got what I need. Thanks!
Im curious what it was you needed, exactly.
ReplyDelete