Insurance and Pre-existing Conditions

Ah, “pre-existing conditions.” A couple words that bring us all together in peace and harmony and close the gap amongst parties, races, and economic classes. Uniting words for all of us to use as joint artillery against the evil insurance companies that stand behind their faceless discriminatory practices. A concept that the most inhumane of inhumane would indisputably agree is inhumane.

Except me. Wikipedia defines insurance as “a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss.”

In other words, insurance is basically a big group of people that are willing to pay a little now to prevent the possibility of paying a large amount later due to some unfortunate, unforeseen occurrence. Insurance can exist because only a relatively small portion of insured are going to become critically injured or sick. From another perspective, this means that a majority of the insured are putting in more than they are taking out. But they keep putting money in because they know they may someday be one of the lucky losers. Not all the insured will or can be lucky losers; not enough money would exist to pay for the expenses. Insurance would cease to exist.

Some people, politicians or otherwise, feel it’s a discriminatory act to deny someone coverage because of a pre-existing condition. After all, someone with a disease has even greater need for insurance than someone who does not. While I agree, I do not agree they reserve the right to be granted insurance after having being diagnosed. Insurance is not a charity nor is it welfare. It is a hedge against risk and those who have been hedging for years should not be required to pay for someone who has failed to do so.

Let’s imagine this hypothetical scenario. One day the government drafts a program to help subsidize cars and has decided to fund it with approximately $3 billion. I know, I know, it’s a crazy stupid idea but stick with me. To make it sound a little more legitimate and family friendly we’ll call it something like Cash for Junkers. Since there are approximately 300 million citizens, the government has decided to pay for the program by randomly selecting one out of everyone 1,000 people to pay $10,000.

“Wow,” you say, “What if I’m the the lucky loser? I can’t afford a sudden $10,000 fee!” So you get together with some of your friends, family, and neighbors and find 999 other people that would like to spread out the risk. You figure that odds are one of you is going to be a lucky loser, so you each agree to put in $10. The lottery day comes and sure enough, one of your peeps is chosen to be a lucky loser. Lucky him — he’s only out $10! Soon after the lottery some of your other neighbors that decided not to put $10 into the pot come knocking on your door and say, “Hey, you know that ‘spread the risk’ thing you were talking about doing? Can we join now?”

Hellz no! Does that seem “fair” to you? Does it seem “fair” to the other 999 that decided to hedge their risk? Regardless of your reason to not throw a Hamilton into the pot, you didn’t. And you’re not going to make other people pay because of it.

This is insurance. Why can people complain to no end about insurance companies not allowing pre-existing conditions? Because they can blame insurance companies, the facade, not the people who are already paying their dues. Can you find a big group of people that want to allow pre-existing conditions into their pot and pay more because of it? Then you start an insurance company.

Before you determine I’m a purely heartless soul, let me give you some background. My own family has sought a health insurance plan when going from a government-sponsored health plan (my wife was a teacher) to an individual plan (I was working for a start-up that didn’t have group insurance). And I was planning on knocking my wife up soon (which, by the way, qualifies as a pre-existing condition if I were to have knocked her up within one year of signing onto the new plan). For several years we were also only on the giving end of insurance — dumping money into the pot and hardly ever taking any out. On the other hand, over the last three months we’ve been the lucky losers and have taken out several times more from the pot than we’ve ever put in.

More than anything, I’m as frustrated as you are that changing jobs means changing health insurance plans and dealing with pre-existing conditions. But let’s not fight the wrong battle. Pre-existing conditions are not the problem, third-party pay systems are. Why can’t you stay in the same insurance pot when you change employers? Why do employers have anything to do with it anyway? If I never have a lapse in my health insurance plan, then I don’t have to worry about pre-existing conditions in the first place. Stay focused on the real problems, not the latest political cusswords.