An injection of common sense on pre-existing conditions

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Posted by Ed Gooding (VA) on May 06, 2017 at 09:30:48 [URL] [DELETE] :

This is really one of the best commentaries I've seen on the uproar about the possibility that insurance companies will no longer be forced to cover pre-existing conditions. From Michael Owen, who you can find on FaceBook:


Coming from the GOP, I'm sure whatever is in the bill the house passed today is awful. But I see a lot of emotional response, mainly around "pre-existing conditions." How awful it is to deny people insurance if they have a pre-existing condition.

I'm about to say something that is going to hurt your feels. You cannot buy insurance for a pre-existing condition, not as a matter of "market failure", but as a matter of the definition of insurance. You cannot buy homeowner's insurance after your house burns down. You cannot buy car insurance after you've wrecked the car. You cannot buy life insurance after your spouse dies. That's not what insurance is. Insurance is the pooling of risk BEFORE something bad happens. That's what keeps the price down when it is allowed to work properly. Something bad but unlikely is costly (rebuild a house, get cancer treatment), so people pool their risk and pay a small amount up front. The pool then has the funds to pay out to those few unlucky enough to get cancer, wreck their car, or have their house burn down.

I'm going to hit you in the feels even more: mandating that pre-existing conditions be covered by insurance completely breaks this. It is no longer insurance, and unsurprisingly, it makes costs shoot up. Imagine if the government mandated that insurance companies had to sell you a homeowner's policy, even after your house burned down. Who would buy a policy BEFORE their house burned down? You'd have to be a sucker to do so. The risk pool would collapse, with the only people buying policies being those that needed payouts. But of course there is no money in the pool. So of course to "fix" the market it just destroyed, the government then has to mandate that everyone buy into the system. Individual mandate; sound familiar?


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