Health Insurance Fable

Once upon a time, there was an insurance company named Profit Insurance. The Profit Insurance company sent it's marketing people across the land to determine the best price to charge for health insurance. The marketing results were that the best price for insurance was $100.

Management sent the the database trolls to the dungeon to work out a strategy for achieving the $100 price point. After examining years of health cost data, the trolls determined that they could sell insurance for $100, and still make a profit, if they did not sell it to people who were already sick. The managers liked the plan and made it so. Many people bought this insurance, but even though it was inexpensive, many young healthy people decided not to buy it. Profit Insurance managed expenses by artful claim denial and returned generous profits to the stockholders.

Now it turns out that in the same kingdom, there was a socially responsible insurance company that did not think it was nice to exclude people from having insurance just because they were sick. This benevolent insurance company decided to sell insurance to anyone who wanted it. Unfortunately, the trolls of the database told them they would have to charge $120 for this insurance policy. The management decided that the good hearted people of the land would surely be willing to pay $20 more to enable anyone to get insurance. Management put the Benevolent Insurance on the market.

People who were excluded from Profit Insurance because of existing illness flocked to Benevolent Insurance. Unfortunately (for Benevolent), existing Profit Insurance customers were not willing to pay $20 more for Benevolent Insurance, nor were the people who opted out of Profit Insurance willing to buy Benevolent Insurance. With only sick people in it's insurance pool, Benevolent Insurance was unable to survive at $120 and they went out of business.

The moral is that if you are in the insurance business and you want to maximize profits, it is best to limit your clients to the youngest, most healthy people you can find and deny as many claims as possible.

If, however, you want everyone to have the opportunity to buy affordable health insurance, you need to spread the risk across the entire population so that the young and/or healthy (while they are young and /or healthy) pay the majority of the costs of the old and/or infirm (until they become the old and/or infirm).

Single Payer/Medicare For All..... the only way to achieve reasonably priced coverage for all. If you bring in everyone, including the young and/or healthy who previously opted out; and eliminate the wasteful administrative duplication across the private insurance companies, everyone can be covered for the $100 (or less) policy.