Why We Need Government-Run Universal Health Insurance and why private health insurance doesn't and cannot work

This video explains pretty well why private health insurance can never be as efficient as a well run national one, such as Medicare for instance.

There are also other reasons why private insurance makes no sense for health.

For insurance to work, everyone paying into the pool must have roughly equal chances of experiencing an unexpected remotely likely event, or an event whose timing is unexpected though the event itself is not.

For example, houses of similar construction, built to code have roughly similar and remote chances of catching fire.

Because the chances of these events happening is remote for any one homeowner and because the costs of the event if it were to occur are very large, people are motivated to purchase insurance and the rates for each insured are low compared to the payout.

For the insurance company it is critical that they be able to make sure they do not insure anyone for whom the presumably remotely likely event is actually very likely. That is why they look for fraud and try to track repeat offenders. However, if you are unlucky enough to have a house fire, you are not more likely to have another house burn down. It is a random event that is unconnected to the likely hood of you having another loss.

Private insurance for health does not work because the need for insurance is largely known to both insureds and the insurer. Sick people want insurance. Healthy people know they are unlikely to need it. So many more sick people want health insurance than healthy people that the company must do what it can to avoid insuring the ill.

If they were to insure people with chronic diseases or who are at risk for disease due to lifestyle and other known risk factors, the premiums would be so high that they would not appeal to the people whose known risk factors were low, and there would be little advantage for the high risk people in having insurance because the yearly premiums would approach the yearly cost of their medical bills.

When you buy an individual health insurance policy, you must be healthy. If you have any pre-existing condition, the insurance company will exclude it, either for life or for a number of years. So they gather a pool of initially healthy people who pay premiums into a pool.

As some of the initially healthy people age and become sick, payments are made from the pool and rates rise. When rates rise high enough the people who are still healthy find that they can switch carriers and join a premium pool that includes only people like themselves who are healthy for the moment. The people in bad health, of course cannot switch to a lower cost plan.

As more and more healthy people leave the pool, sick people begin to dominate it and rates skyrocket. Even if the policyholders cannot be canceled (which is not the current law nationwide) the rates go up and up until they cannot afford the premiums.

This is known to every single person in the insurance industry who has ever studied the principles of insurance. The health insurance industry knows that their business model is an inappropriate use of insurance.