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Why it is not wise, or cost-effective to insure everything, and why it costs more E-mail
Tuesday, 02 April 2013 14:41

By L&T Publisher Earl Watt
Columnist Megan McArdle recently asked a question that had me puzzled, but after reading her statement, made perfect sense.
Her question was simple: Does Health and Human Services Secretary Kathleen Sebelius know what insurance is?
McArdle posed the question after Sebelius responded to a report from the American Society for Actuaries that stated health care premiums would rise 32 percent when Obamacare kicks in.
Sebelius stated that those with catastrophic health care plans don’t really have health coverage at all.
“They’re really mortgage protection, not health insurance,” Sebelius said.
I’m no insurance expert, and I like to tease my friends who provide insurance about the ficus clause and all the reasons to limit claims.
But the truth is, insurance is always going to cost more cumulatively than the raw costs alone.
Insurance companies have to make a profit, and they are entitled to do so.
We also get peace of mind by having insurance, whether it is health insurance, home, auto or life.
But you can’t insure everything without costs increasing.
McArdle used the example of grocery insurance. If we paid an insurance policy that covered our grocery purchases, two things would happen. It would cost more, and we would no longer buy chicken if we could get filet mignon.
Now I got it.
There are some things that should not be covered by insurance because it simply runs the cost up for everyone when only a few take advantage of the extended coverage.
If every procedure is covered, then insurance has to cover them all, and make a profit. Costs go up.
However, if there were certain procedures and visits left to the patient, the cost would be less for everyone.
McArdle’s argument claimed that Sebelius was confused about insurance and pre-payment.
Take car insurance, for example. How much more would it cost if insurance also covered fuel, oil changes and general maintenance?
That’s not how we cover our cars, is it?
We prepare for a catastrophe, an accident, or something unfortunate like theft.
But we don’t ever cover gas because it would cost more than us paying for the fuel ourselves.
But that’s not how Obamacare works.
It wants to cover everyone for everything, whether you would rather pay as you go or not.
Again, you might be responsible and only go to the doctor’s office when it is absolutely necessary.
But how many people are going to take every bump and bruise to the emergency room because they don’t have to worry about the cost? Who ends up paying for that?
All the people paying premiums will pay for it, and that means insurance companies will be raising their premiums to the tune of about 32 percent.
Yes, they told you that Obamacare would reduce costs. Yes, they said we would have to pass the law to see what was in it.
Now, we know what is in it, and we know that costs are going to skyrocket.
Taxes on medical equipment were supposed to help pay the new fees, but that, too, is being exempted because it made no sense to charge extra for someone needing oxygen equipment to breathe to charge them an additional tax when they could barely afford the machine in the first place.
That’s why Sebelius’ lack of understanding of what insurance really means is more indicative of how we got here in the first place.
This wasn’t a plan to protect people from something catastrophic. It is not to provide basic coverage for those who otherwise couldn’t afford it.
And even if you try to increase your deductible to lower the costs, you will find that option, too, has been removed by the Administration.
The end result will be higher costs for everyone with no real way of showing any savings due to more people going to the doctor. That is exactly what will be driving costs higher, because those going to the doctor won’t be paying for the visit. Everyone else will, and that is exactly what this Administration wanted.
This is what America chose, and they are about to find out just how much free health care really costs.

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