A Reminder: What Insurance Is

Barack Obama signing the Patient Protection and Affordable Care Act at the White House (Photo credit: Wikipedia)

by Thomas L. Knapp…….

“Elections have consequences,” outgoing US president Barack Obama once told Republican congressional leaders, and “I won.” He was right. One consequence of the 2016 election, in which the Republican Party maintained its House and Senate majorities and got a president of their own party, is the near-certain, near-future repeal of the Affordable Care Act, aka “ObamaCare.”

What will replace ObamaCare? That’s far less clear, but president-elect Donald Trump, in a January 14 interview with the New York Times, promises “insurance for everybody … in a much simplified form — much less expensive and much better.”

I doubt it. The Republican replacement for ObamaCare will likely have little to do with insurance. On the healthcare front, very few Americans have had “insurance” for decades. What they’ve had, especially since the Health Maintenance Organization Act of 1973, is “pre-paid health care.” Here’s the difference:

Insurance is what’s called a “hedged bet” — a bet you’ll likely “lose,” and would prefer to, but that protects you against major costs if you “win.”

With car insurance, you bet a little each month (your premium) so that if you get in a wreck (that is, if you “win”), your liabilities (and with full coverage your own losses) are covered. You don’t want to get into a wreck. You probably won’t get in a wreck. But if you do, it’s going to be expensive. Better to pay a little out of pocket each month on that hedged bet, just in case.

Real health insurance works the same way. You pay a little each month to protect yourself from the costs of catastrophic illness or injury. You don’t expect the insurance company to provide for your every need, pay part or all of the cost of every office call for the flu, etc. Insurance only comes into play if you have a heart attack, get hit by a truck, or come down with cancer.

Modern (especially post-1973) “health coverage” isn’t insurance. It’s a program through which you pre-pay (or your employer or the government pre-pays) on a monthly basis to have all your health needs at least partially covered.

Obviously this is going to be more expensive than real insurance, especially when the law requires companies to provide coverage for pre-existing conditions, pay for optional/preventative pharmaceuticals that customers might not even want, etc. And since consumers are paying for an all you can eat buffet, demand for care is going to constantly increase, pushing prices up and up and up.

If the Republican replacement for ObamaCare is just another pre-paid healthcare scheme, and especially if it includes the “individual mandate” requiring everyone to buy in, they might as well not bother. Healthcare won’t be affordable again until government gets out of the way.


Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

4 thoughts on “A Reminder: What Insurance Is

  1. Only 18% of people want Obamacare fully repealed, and I suspect they are wealthy people. No one who has had insurance companies cancel their insurance because of illness (as happened to my father when he developed ALS) would ever condemn Obamacare. Nor would those who had a prexisting illness (amazing what insurance companies call an illness!) and could not get insurance. Too bad most of the people who supported Trump thought that he was going to repeal Obamacare and not the Affordable Care Act.

  2. But health is not a privilege, like car ownership or home ownership.

    Healthcare is a right.

    And when do you really want your government involved? When you’re sick!

    Single-payer is the cheapest, most efficient and most effective method. Everybody in, nobody out. Medicare for all.

    John Miller

  3. Obama did nothing in 8 years to help anyone. The deduct amount was so high that few could ever begin to use it. Many simply paid the fine for not buying it as that was cheaper. Guess what , if Trump has his way the people get it returned this year. Obama will not be forgot for a long time. Very likely we will never see another black president and be 20 years before another female runs. Trump won because he was the best choice we were offered.

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