A Reminder: What Insurance Is

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

“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.