by JR Wondra

Created on: December 10, 2008

Why Health Insurance Doesn't Work, and How to Fix It

Health insurance has failed because it underwrites basic certainties, rather than risks. What risk is there that an average working adult will need medical attention in a 12 month span? Probably 50%; maybe better. Thus, a third party guarantor betting against the attendant expenses must be able to charge an inflated "premium" for his promise to pay the bet if he loses. The amount of his payment does not matter as long as his margin, the difference between the premium and the payment ( and the XX% risk-factor), is carefully maintained.

Since the need for some medical attention by a "fee for service" provider is high, the insured risk is not really a risk at all, but an eventual certainty. Over a 5 year period, the insurer/guarantor/bettor will almost certainly be called upon to pay. And, since the bettor does not barter or receive the services, he is mostly excluded from the base transaction. Attempts to inject himself into the purchase and provision of the services skews the focus of the underlying relationship away from the consumer and toward the guarantor, usually without consideration of the medical necessity or efficacy of the services sought, and more importantly to him, toward the cost/return on investment calculations vital to his success.

Health care insurance fails because it does not insure against a "risk." Working Americans do not benefit by spending their health care dollars underwriting the insurers' betting system. They would be better served, and their money more carefully spent, if they controlled the purchase of medical services. Insurers are necessary for those medical expenses that truly are risks; accidents, catastrophic and chronic illness, and the results of activities voluntarily engaged in by the consumer (e.g., skydiving, bullfighting, smoking).

If an average working American set aside the "premium" dollars he spent each month, tax free, to spend as needed at market-driven rates, he would have a readily available pool of funds with which to make his choices, much like pre-qualifying for a mortgage or pre-approval for a car loan. But, what about immediate needs before he has accumulated the "pool", and the danger of the unexpected emergency?

A lump sum payment, equal to the employer's share of his health insurance premium, would quickly establish the necessary pool of funds available to employees, per capita, or upon any system the company and employee agree upon. The employer's incentive

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