from Hacker News

The real reason health insurers won’t cover people with pre-existing conditions

by newmediaclay on 3/13/12, 5:41 PM with 61 comments

• by ars on 3/13/12, 6:55 PM

  This article demonstrates a very common mistake: People think health insurance covers health bills.

  It doesn't. It covers unexpected health bills, which is a very different thing.

  Any type of situation that is expected to happen can not be covered by insurance, it needs to be covered by savings instead.

  However many people want insurance premiums to be a type of forced savings plan, which is why there is such a huge argument in the US about health insurance.

  Those opposed to government regulation want to handle the savings on their own. Those who like government regulation want it to force people to save for health care costs.

• by joedev on 3/13/12, 7:42 PM

  The entire concept of insurance is to share risk. (Egyptians had the bright idea to combine grain together onto shared barges so if one sinks, none of us loses our entire cargo.)

  Risk carries an element of unpredictability. If a scenario is predictable, there is no risk to be shared, ergo by definition a scenario with little risk (e.g. known diagnosis and treatment plan) is absolutely and unsurprisingly not fitting for insurance.

• by tptacek on 3/13/12, 7:19 PM

  I read this yesterday and was unimpressed; it seems that the finding here is "adverse selection", which is more or less the classic canonical problem in insurance.

  Did I miss something?

• by sunsu on 3/13/12, 7:15 PM

  Great article! I just don't agree with the author's confidence in the "guiding hand of the government" in his conclusion. I would much rather have the freedom to purchase future options to buy healthcare rather than have my freedoms removed because the of the fear that the "average 20-year-old" may not have enough foresight to think about his/her future.

• by anarchotroll on 3/13/12, 8:14 PM

  It just doesn't make any sense for a health insurer to cover people with pre-existing conditions. Insurance is all about risk; if you have a pre-existing conditions, there isn't a risk involved anymore, since you already know you have a problem (unless the provider doesn't cover anything that derives from that pre-existing condition which would also increase processing costs).

• by RyanMcGreal on 3/13/12, 7:26 PM

  All the more reason to take economics out of it and provide health coverage via universal single payer insurance.

• by drucken on 3/13/12, 7:39 PM

  Extremely well-written article.

  It also clearly demonstrates one of the reasons why markets alone are simply not sufficient/appropriate for some problems. The rest of the developed countries outside of the US have long understood this with respect to health care.

• by tomx on 3/13/12, 7:46 PM

  As a UKer, it strikes me the US system of health insurance is just inefficient, even if only from a time management perspective.

  Do 300M people really have to negotiate their own insurance, and research carefully all the terms and conditions and so on?

• by zyfo on 3/13/12, 6:51 PM

  Isn't this common knowledge? I'm pretty sure this was something that was mention in a seminar on information asymmetry when I studied Microeconomics 101 a couple of years ago.