The crucial understanding is that incentives are cross aligned because the product is risk coverage.
The more immediate/pressing your need for risk coverage, the worse it is for them to sell it to you. The less you need it, the better it is for them to sell it to you and the worse for you to buy it.
Pretty different than ice cream or cars or housing. Too many people just think “oh corporate greed” without thinking about the underlying economics (partly because of how us culture pretends markets are magic).
In the past, insurance companies (think: liability, fire, life, shipping) responded to a claim by hiring a lawyer and negotiating down. Like most contracts.
So states began creating insurance commissions, which serve as law firms that defend consumers from insurance companies. In practice, their existence forces insurance companies to pay what they are owed.
We need insurance commissions for health insurance. If there is a reason why the policy shouldn't pay (services received after policy expired, for example), the insurance commission has to sign off.
This is how normal insurance works. Health insurance, of course, is not normal insurance.
My immediate worry is that insurance usually focuses on fixing private harm, not public harm.
If my house burns down, there's both public harm and private harm. The public harm is the danger to bystanders, the loss of neighboring real estate values, etc. The private harm is the fact that I lost most of my equity and have to declare bankruptcy to get out of my mortgage.
Insurance is focused around preventing private harm.
So the state is now on it's own in preventing public harm (already the case), but also now liable to remedy the private harm too.
I personally know many millionaires who lost their mansions in the LA fire. I'm glad tax payers aren't paying to rebuild their $20 million dollar houses.
That's an extreme example, but insurance benefits those who have something to lose the most.
Let's keep government insurance focused on things that private industry refuses to insure, like unemployment and health insurance for sick people.
Yes indeed. Part of the problem is having “insurance” draining part of the resources. Long term care means it isn’t an “accident,” but a constant recurring cost. Saving the money up front, producing income, and paying directly for what you need is often a better strategy.
Companies are not in business to lose money, and you have to fight them to collect. That there are some low probability exceptions is not enough in their favor imho.
The more immediate/pressing your need for risk coverage, the worse it is for them to sell it to you. The less you need it, the better it is for them to sell it to you and the worse for you to buy it.
Pretty different than ice cream or cars or housing. Too many people just think “oh corporate greed” without thinking about the underlying economics (partly because of how us culture pretends markets are magic).