Health Insurance facts

How does Health-care Insurance Work?

It is mathematics:
The economy of scale.

In the past a big family was able to provide care for a sick family member. Mankind has always found safety in numbers.
With a Health insurance, you are part of a big group of other people.
Statistics can show, how many of this group will stay healthy, how many of this group will be sick rarely, and how many of this group will need expensive care.
The bigger the group, the more reliable are statistics.
Many people share the cost.

Car insurance does exactly the same. It collects premiums from its customers, then uses that pool of money to pay accident claims when a customer has a wreck.

History of the health insurance
Hugh Chamberlin in 1694, brought up the idea of health insurance. Much later people could buy accidental insurance which was a real blessing for those who got injured in accidents.

Around 1847, the Massachusetts Health Insurance of Boston was the first who offered the first scheme policy with comprehensive benefits. Around 1890 individual policies were offered by insurance companies which covered everything related to injuries and accidents to diseases and sickness.

The history of the health insurance in Germany goes back to the year 1883. In this year the Bismark social legislation was adopted. A further important stage in the German history of health insurance was 1914, when a positive vote on health insurance laws secured the basis of health insurance for all. 1941 the health insurance for all German pensioners was integrated.

March 21, 2010, US-Congress has passed comprehensive health care reform. Every American will be covered under the toughest patient protections in US history. Arbitrary premium hikes, insurance cancellations, and discrimination against pre-existing conditions will now be gone.

Sometimes health insurance rates are unfair, but this is NOT because of mathematics, this is because greed had overwhelmed responsibility!
In a capitalistic society, competition should level the play field, but missing competition - as it happens today often in the US - let to abuse by some insurance companies -
only solution: MORE Competition!
Summary of How Health Insurance Works
Health insurance coverage reduces the risk of financial disaster because health costs are spread across a large group of people, and the healthy people help pay for the sick.

Problems occur, when the mathematical equations / statistics are not correct, or become outdated by big outbreaks of special illnesses.
One of them is the increasing amount of obese people. Their health costs are much higher, because of illnesses caused by obesity. So if you are in a group with many obese people, your premium will go up.
The idea of a health insurance for all, is mainly a mathematical need to get the group of insured people as big as possible.

Example:
If you are in a group with 10000 people and your premium is $500 your health insurance company will get 10000 multiplied with 500 equals $5,000,000.
If 20% of your group get sick and doctor, hospital and medication is $2500
your health insurance will go bankrupt,
because some of the money you have paid is needed to pay for salaries, the insurance building heating and cooling, for lawyers and liability insurance and more.

When there is a small group, the percentage of sick people will fluctuate much more than in a much bigger group.

So what should you look for?
Be part of a group of healthy people in an insurance company that doesn't spend millions of dollars for their upper management and that really takes good care of their customers.
If there is competition and people can compare the benefits of the offered health insurance, premiums will be competitive, what means that the insurance company will calculate your premiums with a "sharp pencil", just enough to cover their costs and make profit.


Be aware that Government data clearly prove
that high hospital costs very often are not
related to high quality patient care

As you read above:
The bigger the group, the better
-------------------------------------------
Let put an analysis on the individual mandate. The idea is a fundamentally conservative.
Why?
There are three choices for how to respond to the uninsured when they require health care.
1) Let them die if they are faced with catastrophic medical costs.
We as a country have deemed that unacceptable, so we allow people in this situation to receive emergency care which, if they cannot afford it, is ultimately paid for by the insurance companies in the form of higher fees charged by the hospitals in order to absorb these costs. That means the cost ultimately is born by the insured.
2) The US can raise taxes and have the government pay for insurance.
A conservative cannot like this idea - sounds like socialism.
3) We, the people, can find a private solution, like the individual mandate, that provides for full insurance coverage, but does not rely on government taxes. This raises the number of healthy people on insurance, which allows the system to accommodate higher-cost customers.
This is the basic concept behind market-based insurance.

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