Insurance?

[darbydh]

I am new to objectivism and I have questions.

What does an objectivist think about insurance? I believe the basic concept is that I provide money now, "to guarantee against loss or harm" or "to secure indemnity to or on, in case of loss, damage, or death." (Reference) This means that the insurance companies, accepting my money, agree to provide money/goods/services when I ask for it. Does an objectivist see it like investment? Is it my own investment or the insurance company’s investment?

What about the insurance companies that drops a person for being too sick? I believe the argument for the insurance companies would be that you have not paid them enough money over time to pay for your own sickness. Let's say that I could die because I am too sick. What about the fact that I have been a productive member of society, I have earned money honestly and have given money to insurance companies so that I may be provided with goods and services later. I would assume an objectivist to argue that I should not expect to receive more money/goods/services than I have provided. But isn't that the point of insurance or any investment? I could make an argument for myself, stating that it was the insurance companies risk for investing in me? Is that fair?

What about a pre-existing condition? I see why it would not be right to attempt to enter into an agreement with an insurance company because the risk is too great for them, nor is it fair. Consider the following. Let's say that I am working, I am insured by my employer, but then we find out that I have a condition. Let’s say that we find out that I need medication to stay alive. What if I wanted to leave that job and go to work for someone else? Let's say that the new insurance company that has agreements with my new employer won't accept me because of this pre-existing condition. Let's also say that the medication I need to live is extremely expensive. Am I supposed to work 3 jobs attempting to pay for this medication? Maybe I could work for a company that pays me enough to pay for the medication. Maybe I could continue to use the previous employer’s insurance company at a higher cost than what was offered while I was still employed. Is that possible? Thoughts?

[softwareNerd]

If our current laws did not encourage employer-purchased insurance coupled with employer-to-employer portability rules, individuals would buy insurance themselves.

The market would create products. For instance, imagine a long-term catastrophic policy that covers any health-related issue that ended up costing over (say) $25,000 in non-elective costs and provided guaranteed coverage till death, at pre-decided rates.

This would be similar to what one can get today for life-insurance. Today People take out life insurance for 20 years, 30 years, or more. it is common for people to start such policies when they marry someone who is not working, or when they have their first child. There's a slim chance they will die that young, but why take the risk. Also, if one suddenly gets a life-threatening disease, buying life-insurance becomes very expensive.

Given our modern technology, we might even see a situation where a couple gets some tests done, and that lets them buy life-time long-term coverage for their about-to-be-born child. We might have innovative option-contracts.

It is hard to predict the types of contracts that might evolve. I've had the following experience in a third-world country. A few cancer specialists wanted to set up a new hospital. They created a company and issued shares. Anyone buying a certain number of shares in the initial offering was entitled to a certain schedule of services and discounts if they were ever to get cancer.

[Nicky]

Insurance is a contract with mutually agreed upon terms, in which the insurer agrees to pay out a sum of money, or pay for some services, in the eventuality of some events listed in the contract, in exchange for a fee, payable under conditions listed in the contract. The contract also lists the terms under which the agreement may be ended unilaterally by either party.

The answer to all your questions is that the government should hold insurers to whatever terms they agreed to in such contracts, and nothing more. If the contract specifies that [insert scenario here] is something expected of the insurer, then they should be forced to do it. If it doesn't, then they shouldn't do it, and the ill person should have to find some other way to get treatment (either using his money or through charity - but not charity from the insurer, which is a for profit business not a charity).

How things would play out if the government allowed for such contracts, and was limited to enforcing them without further interference, is somewhat of a guessing game. But it stands to reason that most health insurance contracts would be signed between an individual and an insurance company, for himself and his family, not between employers and insurance companies.

Employers would rarely have a reason to take that decision away from individual employees and insist on providing health insurance instead of its equivalent in monetary compensation. And individuals would of course prefer to take the money, and decide whether they want to buy insurance with it or not, rather than have that decision made for them. The reason why that doesn't happen today is because the government punishes that practice through various taxes and rules. In 2014, another such tax will be added for employers with over 50 employees (called a penalty, for political reasons), of $2000 / uninsured employee/ year.

Obamacare has also added another incentive against individuals taking out health insurance, in the form of a government subsidy for anyone who needs medical treatment and doesn't have insurance. The subsidy will in fact cover the cost of that treatment (at least in theory, it's unclear whether some of that cost will just be stolen from unwitting insurers directly), minus a small monthly fee for the duration of the treatment (the government actually calls this scheme "subsidized insurance", but it clearly isn't, it's government provided medical care). This scheme is already in place. Soon they will also introduce a small, poorly enforceable penalty that is meant to induce people to buy insurance, but it won't work in cases where it is meant to work (because, like I said, the penalty is almost impossible to enforce against those who are unemployed or work low paying jobs that don't provide insurance).

Note: I have introduced some slight simplifications into my description of Obamacare, but they are not over-simplifications. They describe what is going on perfectly. The law is intentionally designed to over-complicate the procedures by which relatively simple socialist schemes will be applied, for political reasons.)

[moralist]

I am new to objectivism and I have questions.

What does an objectivist think about insurance?

While I'm the farthest thing from an ideologically pure objectivist. I can share an offbeat view that insurance is the expectation that other people will pay your bills. No system works when everyone expects someone else to pay their bills... however, the present insurance industry would have made Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi proud had he been alive to see it.

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[Dante]

Good replies by sNerd and Nicky. I'll only add a historical aside about how we ended up with health insurance that operates through our jobs and our employers, when it is so clearly a bad system. Following WWII there were a number of wage controls which prevented employers from competing for workers through wage increases. Thus, firms found a different way to compete for workers: by offering more lavish benefits packages, including health insurance. Eventually the wage controls were lifted, but at that point employer-managed health insurance was the status quo. Later, this system was entrenched with tax breaks for employer-provided health insurance making it much more expensive to purchase health care independently. All this to say, we're stuck in a bad system, and it's attributable mainly to the unintended consequences of past government controls.

[moralist]

All this to say, we're stuck in a bad system, and it's attributable mainly to the unintended consequences of past government controls.

A bad system is the only possible outcome when people choose to entrust their own personal risk to a collective regulated by a bureaucracy.

[My 99 are free]

I see it as insurance.  When there is a contract to pay out the insurance company better.  Should the government force actions?  Never.  The government's role is to prevent force actions.  When you have a society of people who respect body and property, you don't need government.

Edited February 17, 2013 by My 99 are free

[ruveyn1]

Insurance is a form of risk dilution or risk reduction.  When the premiums are calculated according to probabilities accurately it is a sound scheme.

 

ruveyn1