March 18, 2010

Pre-Existing Conditions Important For Insurance

What is the definition of insurance?  Insurance is the transfer of risk from one party to another.  Usually, one party is willing to accept the risk of the other party by virtue of a premium.  For example, if the insured is wanting to insure his boat from natural disaster, the insurer will offer such protection (from property/monetary loss) at a rate deemed comfortable by the insurer.  A boat in the middle of New York is being insured and a boat on the Florida coast is being insured.  Which boat insurance policy is more expensive in our example?  Well, the boat that brings the most risk to the insurer will be the boat that maintains the most expensive policy.  So, the insurer is willing to accept both risks - but, if he is charging $300/annually (for a 50k damage policy) for the boat in New York and $300/annually (same 50k policy) for the boat in Florida, where is the insurer most likely to have to pay a claim?--Obviously in Florida.  Now, if insurer charged the same $300/annually for both New York and Florida, the insurer will take a very large hit once the next hurricane blows through Florida.  To which the Left would shout with joy that the insurance company is taking a hit - remember wise-guy, if they take a hit, all of the other policies they insure will take a hit as well. 

Anyway, so, for our example, the insurer must charge more for the same 50k policy in Florida than he would in New York.  Why?  Because the risk being transferred is greater in Florida than in New York.  Now, let's turn our attention to health.

(Let's assume health care operates as a lump sum benefit based on diagnoses.)  The policy sought after is the same 50k policy, but it is for health and not for boats.  Person A has Type II Diabetes.  Person B has Type I Diabetes, had a stroke 3 years ago and is about to go on dialysis.  Which person brings more known risk to the table?--Person B, obviously.  So, again, the insurer will charge more for higher risk.  Is this wrong?  No, absolutely not!  The only way an insurance company is able to pay its claims is by taking the premiums and investing them to make money.  So, if an insurance company is going to consider a high risk individual (a person they will more likely pay a claim on sooner) they need to be able to cover that loss.

Now, are there people with so great a risk that insurance companies are not comfortable with covering them?  Sure.  Is that wrong?  No!  It is a private company and it can set its own standards of risk tolerance.  So, what does Obama's plan do to this scenario?

Obama wants to eliminate pre-existing conditions.  By doing this, the risk transfer is 100% on the insurance provider.  Therefore, it is no more insurance, but simply reimbursement coverage.  Now, if an insurance company is required to pay claims for any and every thing, what do you think will happen to premiums?  Again, the company is trying to protect against loss.  Well, we would have our Florida example to the 10th power.  Insurance companies would raise premiums; possibly hundreds or even thousands of percents higher.  By the way, who pays these premiums?  We buy the policies, so we do!  If your premium jumps 1000%, what would you do?  Well, you'd still keep your cable, but you'd get rid of the insurance.  Taste it - because you know its true.  So, insurance policies are being dropped at a rapid pace.  With no client's paying premiums, the insurance companies do not make money.  Businesses that don't make money, fail.  Obama's plan is to destroy the insurance industry thereby leaving no other alternative but to rely on the sugar mama of Government.  However, the Government cannot pay for this without help from your taxes.  So, instead of paying premiums to an insurance company, you will pay higher taxes to cover this massive intrustion into capitalism.

Call your Congressman and demand a "no" vote on healthcare!

Dial: 877-762-8762 or 202-224-3121 or 202-225-3121

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