It all comes down to something called adverse selection. This phenomenon exists in many areas of economics and finance, but in insurance, it essentially defines the rules of the game.
The essence of anti-selection is that the insured knows._several_More about risk than the insurance company. For example, the insurance company decided to sell fire insurance policies. They looked at the number of houses in the city, examined the number of fires per year, divided one by the other, added their profit margin, and voilà – they arrived at the insurance rate.
Clients took a look around, scratched their heads, and decided to get insurance. First and foremost, those with wooden houses and straw roofs rushed to do so. A financial year passed, and the insurance company reviewed its portfolio and realized it was unprofitable. They began analyzing the situation and introduced differentiated rates based on factors like the material of the house, the type of roof, heating system, distance to the fire department, and whether there was an alarm system. Now, to obtain a policy, one has to fill out a very long questionnaire. The prices also vary significantly. In other words, clients, who already didn’t understand why they needed to insure their brick house with built-in sprinklers, were even more confused about what they were paying for. Yet, some still came in and bought a policy.
Another financial year has passed, and the insurance company has once again calculated its losses. Naturally, those who are more likely to experience a fire are the ones who will buy the policy. Not all factors can be accounted for in the questionnaire. And the client knows more about the likelihood of a fire than the insurance company does. So what does the insurance company do? It raises the rates. What do the clients do? Responsible clients with low risk are even less inclined to get insured. Meanwhile, clients who are on the verge of a fire continue to purchase insurance. They don’t care how much the policy costs because a fire is definitely going to happen. Of course, this is an exaggeration.
The situation in health insurance is similar. Only those who are not very healthy will rush to get insured, and the insurance company will raise rates, thereby filtering out more and more conscientious clients. As a result, health insurance costs an outrageous amount, surrounded by a thicket of conditions and exclusions, and is not sold on a mass scale at all. From the insurance company’s perspective, if you buy insurance, you definitely intend to seek treatment. In extreme cases, insurance will cost twice as much as the expected average treatment. They need to account for both risk and profit.
What can be done? It is necessary to ensure that the insured person, the guy who is fully aware of his risks, does not participate in the decision-making process regarding insurance. How can this be achieved? Through various types of group insurance: employees of a company, credit card holders, etc. For comparison, travel health insurance costs 200-300 euros per year at retail. The same insurance sold as part of a “package” with a credit card costs 5-20 euros per year. The price difference is 10-20 times! And yes, 95% of the insured will end up paying “for that guy” who breaks his leg while skiing.
Now let’s look at insurance, which is something everyone needs: driver liability insurance or health insurance. After all, the occurrence of insured events for these types of insurance is practically guaranteed for everyone. If not this year, then next. And if such insurance is voluntary, it will cost a fortune. But if everyone is required to have insurance, access to quality healthcare won’t depend on the thickness of one’s wallet. Humanism, justice, all that.
The state is only capable of violence. Everything the state can do is apply force. A legitimate state creates public goods through violence. A corrupt state simply feeds the enforcers. A public good is a type of product that everyone can use, but which costs money. You can’t create it without violence. It is necessary._oblige_pay a road toll so that everyone can drive on good roads. We need to_oblige_to buy insurance so that everyone has the opportunity to receive affordable medical care.
The question of why healthy people suddenly pay for the sick is more of a philosophical one. Healthy individuals have two options: to buy insurance that is ten times more expensive (in the case of individual insurance) or to overpay by just 20-30% by covering the treatment of a drug addict or an obese person. If we set aside such ephemeral concepts as “justice,” the second option is more advantageous.
By the way, about justice. Different societies have different views on what is fair and what is not.
Here’s a dilemma: You need to give money to someone in need, but then someone who doesn’t need it will also get the money. In Europe, they would choose to “pay the needy.” In the US and Russia, the choice would be “not a penny to the crooks.” In the US, they would spend a million dollars to ensure “justice prevails,” and the thief who stole a rug from someone’s home would, after a long trial, get what he deserves and end up in prison for several years, where he would be fed, clothed, and guarded. In Europe, they wouldn’t even send the thief to prison. That would be too much of an honor. Instead, they would closely monitor him while he’s free and spend money (much less) on benefits for him, education, and social integration. From an American’s perspective, this seems unjust: He stole, yet he still gets benefits, education, and a personal growth coach. From a European’s perspective, it’s the opposite. There’s no point in trying to “take back” what was stolen, and fixating on the past is meaningless. нет. We need to make it as beneficial as possible for society (and it doesn’t matter that it’s also advantageous for the thieves).
That’s why, by the way, in Europe there is a well-developed culture of mandatory health insurance, while in the U.S. it just won’t take root. I tend to think that society simply hasn’t matured enough. Rednecks and newly rich people, who only dream of money – what can you expect from them?