Monday, 12 September 2016

The (Increasing) Problems With Insurance

Date started: 10/9/16                     Date completed: 11/9/16                     Date first published: 12/9/16

Insurance. Tricky, isn’t it. Do you buy it, or do you not? Sometimes, we don’t have a choice. And sometimes, when the saleswoman’s just been, it feels like we don’t.

The trouble with insurance is that it is, at its heart, essentially a form of gambling, because it’s dominated by ignorance, and involves money, whether anything happens or not. And, in the true tradition of industrialised gambling, the odds are rigged so that the bookie – the insurance company – always wins. Like in ‘conventional’ gambling, stupidity seems to be the name of the game.

Counter-intuitively, insurance actually works best when it’s stupid; by which i mean everyone gets the same odds, because that way it distributes risk away from unsafe people, to whom bad things are going to happen, toward safe people, to whom bad things are not going to happen. I mean, bad things aren’t going to happen to them, so they can afford the payouts, can’t they.

In this, stupid-insurance system, we have a system that works like social-taxation. It redistributes costs from the poor to the wealthy – from the hazardous to the safe. Research has shown that wealth inequality and health inequality go hand-in-hand, as healthier people are freer to develop wealth-returning careers, and to invest in their children, who will invest in their own, and so on. And because they’re healthier they live longer, so have more time to accrue wealth, with which to invest.

And this is where we meet the crux of the insurance system’s failure – healthcare.

Insurance-based systems fail to be compatible with the ideals of universal healthcare, as long as they are not infinitely stupid. I shall explain...

Let’s say you’re a healthy person (and given that most people are congenital optimists, you probably think you are) who wants to pay as little as possible for your health insurance. Well, showing off how healthy you are means the health insurance company will worry less about having to pay money back to you. And so they will charge you less. This is like a bookie offering you longer odds, because you both agree that your horse is less likely to win. Except in this scenario you don’t get more prizemoney, you just pay less for the ticket.

This all sounds beautiful , so far. I’m healthy, so why should i pay more for my health insurance than i absolutely have to? But how much do i have to?

Before we imagine what the situation looks like for an unhealthy person, let’s imagine that you’re a perfectly healthy person. This means that you can be certain that you’re not going to get ill. Well, in this case, the insurance company can be certain that they’re not going to have to pay you any money, ever. Ever, ever, ever. Will  they charge you nothing, in this scenario? Of course they won’t – they’re a bookie – they’ll always charge you something, because they write the rules, and the rules say that overall, they always win. That means a surcharge on every contract.

In fact, generally-healthy people – the ‘worried well’ are the mainstay of an insurance company’s income. The whole purpose of an insurance company is to introduce costs that needn’t exist, just so that the insurance company can continue to exist. They don’t operate for the sake of your health – they operate for the sake of their own, the insurance company’s health.

Now let’s consider the situation in which you’re an unhealthy person.

Let’s say you have a faltering immune system, you’re incredibly clumsy, the lot. You’re a walking (or not walking) disaster area, and the odds of you being involved in an insurance claim some time in the next 24 hours are incredibly short. Almost 1:1. Now what’s the insurance company going to do? Well, because they are almost certain that they’re going to be paying out money to you, every day, they’re going to charge you huge amounts, so that they get more money out of you, than you get out of them. That is the mainstay of their business, after all.

And so, by taking out insurance, you’re taking on the insurance company’s profit margin as an additional cost to yourself, thereby increasing your costs overall.

I hope you’re getting an idea of how much of a gamble insurance is, by playing these scenarios through your mind, if you didn’t already have one. By taking out insurance, you’re essentially saying “i think i’m more likely to get injured/sick than the insurance company thinks i am”. Isn’t it strange, how people can be optimistic one moment, then woefully pessimistic the next?

Let’s go back to the start of this mini-essay, and my point that insurance works best when it’s stupid. In a world where the insurance industry genuinely cared about you, they would want to care about everyone – not just the healthy – they would want to overcharge the healthy ones, to impose a cost on them, in order to redistribute the shitty bits of life away from the people who are charged higher insurance premiums, for being a genetic timebomb, incredibly unlucky, or an 18-year-old boy buying their first car.

“Whinging about your premiums, Ms Jackson? That’s a bit selfish, isn’t it? You’ve been fine all your life, and look to have a bright clear future ahead of you. At least 50 years of it. Whereas Freddie here has one remaining leg, with 17 breaks in it, due to Type I diabetes, and a nasty fall. Now, don’t you think he’s had enough shit in his life, Ms Jackson? Don’t you? That’s right, you can afford the bill much more easily than he can. I’ll tell him you were so gracious. Or would you like him to thank you personally?”

But the insurance industry is not philanthropic. It doesn’t really care about you. You’re a cash cow. So when it wants to know about you, it doesn’t do so so that it can work out whom to redistribute the shittiness of life from and to, but to work out who are the healthy people who can be offered lower charges, while worrying them into thinking it’s worth paying for it at all; and who are the less-healthy people who can be bled through the nose, potentially leaving their family (or the State) to pick up the bill when they eventually die.

This is anathema to the notion of universal healthcare, because it means pricing the most-needy out of the healthcare that they desperately need.

No wonder insurance-based systems tend toward being compulsory. For example, driving insurance. You’re not allowed to say “i’m an 18-year-old boy, i can’t afford it, so i’m not paying” because that would be free-market economics. That’s only allowed to be done by the company – not the customer. Insurance is obligatory.

No wonder younger people in places like northern Europe aren’t even bothering to learn to drive any more. It’s just too expensive. Insurance companies are buying up personal data about us all, surveilled through pharmacies, banks, supermarkets, and wherever else they can; so that they can learn how to target the higher-risk amongst us, to charge us stratospheric fees. And because the law says insurance is compulsory, for anyone who wants to drive a vehicle on a public highway, there’s nothing we can do about it. The only option for such people, is to vote with their feet, and walk. Or cycle. Or walk to the bus/train station. Or sprout wings and fly.

And then there are the exclusions. Oh, FSM, the exclusions!

If you get sick in the wrong way, or in the wrong country, or you crash into a cow, or are subject to some kind of risk that the insurance company hadn’t tumbled to, like weather, then it gets called an ‘act of god’ or something, and they refuse to pay up. Not at all. Not a single penny. And the same can happen, simply because the reams of smallprint contained a disclaimer contradicting the bigprint. Plus, insurance companies are permitted to change their terms and conditions at any time, meaning the insurance you buy might not cover what you needed it for, by the time the ‘product’ (the payout) is due to be delivered!

What’s the point of insurance if you’re not insured?

This is why insurance companies have a long list of exceptions relating to “pre-existing” conditions. Essentially, if you’ve fallen on the wrong side of chance before, they’re not taking any risks with you. And they’re not giving you a rebate, either. In the equine gambling metaphor, this is them deciding that your horse didn't win this race, because it had won a race before.

And then, if it’s medical insurance, the costs you’d thought you’d embraced can turn out to be higher than you’d hoped, because there’s an infinity of middlemen who can just pitch in at any moment, and claim expenses. The bullshit in all of this game-playing and paperwork, by the insurers and their cohorts, is actively hampering the efforts of healthcare professionals around the world, by stressing their patients. Not to mention the docs, who have to come to arrangements with insurance companies, about how their ridiculous paper-pushing games are going to be mediated.

The more ‘intelligent’ insurance becomes, the more of this wrangling there’s going to be, as insurance companies quibble about how much they should pay out, and to whom, for what services, and under what conditions. They're going to do everything they can to maximise your payments to them, while minimising their payments to you. If you think insurance is a nightmare now, then just wait – it’s going to get worse, as personalised contracts become yet more personalised, and the smallprint has to be rewritten for you, with your consent... if not ahead of time, then after the disaster’s hit you! That’s a perfect opportunity to abuse you through the stress you’re already going through.

And how are individuals going to cope, when things gets messy? Only with an army of citizens advice volunteers, ombudsmans and lawyers. The last of these three are likely to add even more expense, to the people who are least able to pay.

This is a system that can only get worse!

Insurance works best when it’s stupid, because it means the arbiters of it – the insurance companies – don’t know how to screw us over as well.

So as a consumer, the only things we can do, are to continue to try to pay as little as possible, and to hunt on other people’s behalves if they’re worse off than us, in preference to ourselves; and to fight for reform – in the way companies are allowed to own and distribute data, the way the insurance companies are allowed to be run, and the extent to which they are allowed to pervade essential services.

As strange as it may seem, the USA now has a semblance of universal healthcare, in the form of Medicare, thanks to Obama. But most of the credit should probably go to the subtle forces of economics and science, that have made insurance more expensive, and alternatives much easier to administer. In the past, federal healthcare (or anything federal, for that matter) has been difficult simply due to the scale of the country. The USA is half a continent, and so it has many of the same problems faced by China. But advancing technology, especially involving the internet, could change this, making it much easier to run a USAian version of the UK’s National Health Service.

Economics might force this to happen. Illness is hugely expensive, and insurance is inflating that cost.

Links and stuff:

Travel insurance gambling

The state of insurance-based private healthcare in Australia

"Some young drivers are faced with quotations of up to £27,000 a year to insure their cars"

"From 1983 to 2008, the share of 16- to 39-year-olds with driver's licenses declined markedly, with the greatest decreases among drivers in their late teens and early 20s, according to a study at the University of Michigan Transportation Research Institute"

"Church told flood damage is not covered by insurance due to it being an 'act of God'"

Ridiculous exceptions also apply to pet insurance too

"More than 3.5 million workplace injuries and illnesses occur each year in the United States, costing an estimated $250 billion annually"

"Using data from the Medical Expenditure Panel Survey and the U.S. Census Bureau, researchers calculated the premiums paid by Americans from 2000 to 2009 and compared them to incomes. They found that insurance premiums rose 8 percent from 2000 to 2009, while household incomes rose only about 2 percent. If those same rates continue during the next two decades, the average cost of a family health-insurance premium will hit half of median household income by 2021 and surpass it by 2033"

The European Court of Justice ruled in 2012 that optional price supplements that "are neither compulsory nor necessary for the purposes of the flight" such as flight insurance must be changed to be opt-in

The additional costs of sharing medical data with extraneous organisations that don't give a crap about patients:

"Health insurer Centene Corp. says it is missing half a dozen hard drives that contain the personal and health information of roughly 950,000 clients, including the names, addresses, birthdates, Social Security numbers, member identification numbers and health information of patients who received laboratory services between 2009 and 2015"

"The UK branch of Zurich Insurance has been fined a whopping £2.28 million after losing details of 46,000 customers, including details of customers’ identities, and in some cases bank account and credit card information, and other financial information. Questions must be asked as to why this sensitive data was not encrypted at the very least"

Adventures in smallprint:

Flight insurance

Tickets to shows, plays, gigs, etc

Faulty plumbing

Hundreds of lives saved by universal healthcare in US already

Inequality: Of wealth and health

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