Pre-existing Conditions and Inability to Get Insurance
This is one thing that really annoys me, when people complain that they have a pre-existing condition and that they can’t get health insurance. Well no kidding.
Let’s run through how insurance works. Insurance basically protects people against the “bad state” should it occur. Ideally it works by offering people a menu of plans to choose from that have various levels of coverage, premiums, and deductibles. People then self-select by picking one plan. A given plan is designed so that the premiums from all the people under that plan pay for the expected costs of the “bad state”. The deductibles/premiums are set up to try and get people to self-select correctly. For example, a healthy young person might prefer a high deductible/low premium plan vs. a low deductible/high premium plan. Now, should the “bad state” occur, you receive the payment (have services paid for up to the agreed maximum) under the plan you picked.
Now, if you have a pre-existing condition that messes everything up right at the point where the premiums are designed to cover the expected costs. The term “expected cost” isn’t just something used in insurance literature to make people sound both erudite and boring, it also means you multiply the probability of getting sick times the number of people times the cost of getting sick. For insurance to work, the probability can’t be too high. For people with a pre-existing condition the probability is at its maximum possible value, one or unity. For these people it isn’t a question of if they get sick, they are sick and they will consume health care resources with certainty.
The reason this is a problem is that, unless there is a government mandate forcing pooling, the only people who will be under the “pre-existing condition plans” will be people with pre-existing conditions and the premiums will equal the costs of treatment. In short, people with pre-existing conditions cannot get insurance save when pooled with other people.
But when you pool people with pre-existing conditions with those who are healthy, you are basically providing a transfer of income form those who are healthy to those who have pre-existing conditions. So please, call it what it is. You want to give people with pre-existing conditions other people’s money so they can get treatment. Calling insurance is simply a lie.