First, Insurance was originally developed to handle the
unexpected events in your life, things you wouldn’t normally plan on. Car insurance for example, is in case of the
unexpected gut-wrenching, accident. Now let’s
imagine that someone suggests adding regular, every-day kinds of things to your
car insurance and everyone in the nation suddenly owns a car (the comparison is
health insurance so just go with me on this one). Tire replacement and oil changes are now
covered on your insurance. Hurray! You will only pay $50 for a set of 4 new tires
and $9 for an oil change while your insurance premium handles the rest. What will happen next?
We have leveraged our purchasing power by ordering tires in
bulk through our insurance provider. Tires
are now more affordable and better traction means a safer drive. For a teenager it may mean quicker acceleration
to get on the freeway or for those impromptu races down State Street. So
everyone in the nation gets in the habit of buying brand new tires every month
or so. After all, why bother with used
tires when a new set is so affordable?
And you might as well change your oil every month to keep that machine
well lubricated. Ignoring the environmental
impact of mountains of used rubber piling up, let’s just focus on cost. You are paying less for tires now right? WRONG.
The suppliers are not giving out tires for $12.50 apiece. They aren’t even supplying them for $120 apiece,
after all demand and consumption has increased dramatically and they are having
a tough time keeping up. (Demand
determines price along with supply which cannot keep up) The cost per tire has
gone from $120 to $300 per tire. You may
have noticed your insurance premium going up too. Not only is the insurance company paying out
more for all these tires but you have to pay them for the service of managing
your money. The insurance company needs
you to cover their extra operational costs as well.
This is what happens when there is a disconnect between purchaser
and seller – over-consumption. It
isn’t a little extra that you’re paying, it is A LOT of extra dough.
So now instead of paying $120 for a decent tire you are paying
$350 (once the insurers include their fees) and our story isn’t over yet. Eventually the tire industry cannot support
the demand and not only are they increasing the prices but now you have to get
on a waitlist to get your tires.
Eventually the customers yell at the insurance company to stop raising premiums
and so they, or the government start limiting how often you can purchase a
tire. Now instead of wait lines you have
additional regulations which have to be monitored by someone, and you are going
to pay their salaries one way or another. It would have been cheaper and more effective
for people to just purchase tires themselves.
Now let us bring this thought back to every day medical
expenses being covered as opposed to limiting insurance to unexpected events. A lot of people who didn’t use Viagra now
have easy access to such treats. People
who checked their wallet before going to see the doctor, now run down to the
hospital without a second thought. The
mere idea of being able to visit the doctor whenever leaves us all cheering inside
for social advancement and who can argue against having a better sex
drive? Demand is going to increase
exponentially on services and products which before were handled on an as-needed
basis. I doubt that the supply of doctor’s hours will keep up. Microeconomics dictates that costs will go
up, as will the wait lines and eventual over-regulation by a 3rd
party (the Federal government or the health insurance industry). It is really not a matter of if but only a
matter of when. So while our liberal
friends cheer the addition of contraception to every health plan in the nation,
the economists are asking, why do you want to pay so much more for contraception?
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