Wednesday, June 21, 2017

Florio’s Misleading Take on Insurance and Pre-Existing Conditions

Recently, former New Jersey governor James Florio critiqued a key element in the Republican AHCa plan to revise ObamaCare. The GOP would replace ObamaCare’s individual and pre-existing condition mandates with a separate state-level insurance pool for people with pre-existing conditions. Republicans say that, by separating the small percentage of pre-existing conditions from the rest of the insurance market, general insurance rates will fall substantially.

But Florio observes that NJ has already tried this so-called “assigned risk” pool in its auto insurance market, and argues that the approach failed and was eventually done away with.

That’s all debatable. But what caught my eye was the following statement from his article, which is titled Gov. Florio: GOP's high-risk insurance pools makes same mistake as 'bad driver' scheme:

The deficiency in these devices is that they are not insurance. The concept of insurance is the sharing and spreading of risk. The high-risk pool is about insurers avoiding risk -- the off-loading of risk onto someone else.

In the current case, it would be taxpayers.

I think it’s very important to understand what insurance is and is not. Socialized medicine-oriented statists always attempt to frame an issue in socialist/collectivist terms. In my view, that’s what Florio is doing here in his critique of Republicans. Florio also endorses so-called “essential benefits” mandates, which is a way of redistributing wealth through “sharing and spreading of risk.”

I offered my view in these comments:

This is highly misleading.

First of all, risk-sharing is not the essential purpose. I don’t buy car or homeowners insurance to subsidize others. I buy it for personal financial protection. The primary purpose of insurance is as a financial tool for protecting against unforeseen, catastrophic future expenses. Insurance enables a consumer to arrange for such payments in the event one happens. That’s what my premiums pay for—not a chance to dump the cost of my risk on others. Insurance, properly understood, is a personal financial planning tool, not a gimmick to escape from the personal moral obligation to be responsible for one’s own health care. For insurance to work, insurers must be free to objectively assess risk and charge each customer accordingly, in a competitive environment (which, thanks to legal restrictions, we don’t now have).

Insurance is not for the purpose of redistributing wealth. Florio says assigned risk pools “offload” risk to taxpayers. But ObamaCare does the same thing, in different form. It “offloads risk” on all others through artificially higher premiums on health insurance, as well as through taxpayer subsidies to insurance companies, to subsidize “pre-existing conditions” and other mandates that enable some people to escape higher premiums based on the higher risk they pose or the choices they make.

If the GOP plan is wrong, so is ObamaCare. So is any scheme that is essentially forced wealth redistribution. Whether we’re talking about the ACA and the AHCA, which uses “private” companies, or single payer, which bypasses the private sector, we’re not talking about real insurance. We’re talking about forced “sharing and spreading of risk,” a fancy word for forced redistribution of wealth—which is legalized theft and thus fundamentally immoral and contrary to the proper purpose of government, which is to protect individual rights, including rights to spend our own money as we judge best.

It’s funny that Florio should accuse Republicans of getting people "priced out of the market” in the same breath that he endorses government-mandated “essential services, like maternal care” being forced on insurers and consumers. It is such mandates that substantially drives up the general cost of health insurance—thus making insurance unaffordable for many more people. Neither the federal nor state governments have any moral right to dictate health insurance policy provisions, aside from laws that forbid fraud, breach-of-contract, and the like. Thanks to decades of government interference, we’ve arrived at the ultimate absurdity—”unaffordable” health insurance, at 18%+ of GDP, and at a substantial cost to our freedom and individual rights in healthcare!

Related Reading:

Real vs. Our Pseudo Health Insurance

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