The Pankian Metaphor 3038

No. What I am saying is that with all the other kinds of insurance I can think of, the odds that a particular individual will cost the insurer more in payout than they can afford to pay in premiums are, hm, well below certainty, but that it's different with regard to medical insurance.

Here's the kind of thing I have in mind. (I admit I know very little about how insurance companies actually do business; this is speculation on my part, but seems to me to make sense ....) :

An insurance company can probably identify, say, a group of 1000 people who it thinks have roughly the same risk of being involved in an auto accident in which they are at fault -- meaning that the insurance company is fairly sure that about N of them will be involved in an accident in any given year. The insurance company figures out an average payout cost for each of these N accidents, adds something for its costs and profit, and divides this number by 1000 to figure out how much to charge in premiums. If N is a lot less than 1000, and the payout per accident (plus insurance company's costs and profit) is not too high, the result will be something that most of those 1000 people have some hope of affording. The key point is that the insurance company can't be sure *which* of those 1000 people will cost them money, only that about N of them will. Even a person who costs them money one year might not cost them money the next year (though that person may move into a different risk category, perhaps one in which 2N of the 1000 people will be involved in accidents, and would therefore probably be asked to pay a higher premium).

Compare this to the situation with medical insurance. With medical insurance, it is possible to identify particular individuals who almost certainly will cost the company more in payout during the next year than they can afford in premiums -- and the only reason "almost" is in there is to exclude the cases in which the person is either miraculously cured or doesn't survive the year. I can't imagine why any company interested in making a profit would offer this person a deal in which the individual pays X dollars in premiums and costs the company 100X in payout, unless (1) the person is part of a group being covered as a group, or (2) the company is required by law to offer the person this deal that doesn't make sense for the company.

Again, my point is that with all the other kinds of insurance I can think of, it's difficult or impossible to identify particular individuals who will almost surely make claims ("cost the company money"), but with medical insurance, this *is* possible.

Going back to your point, the company doesn't expect to make money on each and every one of those 1000 people being offered auto insurance; it expects, however, to make a profit on the group, and that seems reasonable to me (and I'm sufficiently left-wing not to think that anything a business might find profitable is reasonable :-) ). Insurance companies do engage in an attempt to be more precise about the risk that a particular individual will cost them money -- e.g., charging younger people more than older people, or men more than women -- but this only goes so far with most kinds of insurance, because it's difficult to identify particular individuals who will .... But with medical insurance, it is possible to identify particular individuals who are not just high-risk but almost-sure-risk.

I don't think I'm explaining myself clearly -- the distinction is clear in my head, but not coming across here -- but this is the best I can do right now, and maybe I can clarify based on responses ....

I guess overall my thinking is that the "insurance" idea, in which risks are buttociated with groups, and costs are shared among the group, may make sense for a lot of things -- auto accidents, damage to one's home, etc. -- but simply doesn't make sense for covering medical costs, because of this distinction I'm trying to make about the precision with which a particular person's risk can be buttessed.

-- B. L. Mbuttingill ObDisclaimer: I don't speak for my employers; they return the favor.