That is because everybody uses health insurance for things that really shouldn't be insured.
My Dad was recently complaining that his prescription coverage was cut, so he was now paying about $100/mo for his prescriptions. I asked how much the pills would cost with no coverage, and he dug out the bills and determined they would cost about $600/mo. This sounds outrageous I suppose, until you realize that he pays about $1100/mo for insurance. Granted, that is for more than just drugs, but if insurance was really for unaffordable things, it wouldn't cost that much. My dad is still paying for his monthly prescriptions... just in a roundabout way.
Anecdotes aside, the article points this out too. Would you expect your fire insurance to cover the cost of batteries for a smoke detector? Of course not. But if it did, the batteries would most likely cost more, since instead of having to sell to millions of battery buyers in Wal-mart, battery makers would be selling to mere dozens of fire insurance companies, who would pass on the costs to those buying the insurance, and hence have no incentive to control battery costs. Even worse, the administrative costs of having people constantly file battery-replacement claims would dwarf the cost of the battery itself. So people would suddenly be paying $25 more a month to avoid buying $2 worth of batteries.
Sounds absurd I'm sure, but that is exactly how our comprehensive health insurance works today.
If people actually used health insurance for things that are equivalent to a house burning down, it would function more like other insurance, and get cheaper. I'm 26, and my most expensive health expense to date was my birth. The next closest thing was probably when I had my adenoids out when I was 7. After that, when I broke my big toe ($900). None of those are akin to having a house burn down or getting in a car wreck. The first two were predictable and all three could be payable with credit or HSAs. It makes no sense to pay thousands of dollars a month so you can go to the doctor for free when it would only cost $150 anyway.
My Dad was recently complaining that his prescription coverage was cut, so he was now paying about $100/mo for his prescriptions. I asked how much the pills would cost with no coverage, and he dug out the bills and determined they would cost about $600/mo. This sounds outrageous I suppose, until you realize that he pays about $1100/mo for insurance. Granted, that is for more than just drugs, but if insurance was really for unaffordable things, it wouldn't cost that much. My dad is still paying for his monthly prescriptions... just in a roundabout way.
Anecdotes aside, the article points this out too. Would you expect your fire insurance to cover the cost of batteries for a smoke detector? Of course not. But if it did, the batteries would most likely cost more, since instead of having to sell to millions of battery buyers in Wal-mart, battery makers would be selling to mere dozens of fire insurance companies, who would pass on the costs to those buying the insurance, and hence have no incentive to control battery costs. Even worse, the administrative costs of having people constantly file battery-replacement claims would dwarf the cost of the battery itself. So people would suddenly be paying $25 more a month to avoid buying $2 worth of batteries.
Sounds absurd I'm sure, but that is exactly how our comprehensive health insurance works today.
If people actually used health insurance for things that are equivalent to a house burning down, it would function more like other insurance, and get cheaper. I'm 26, and my most expensive health expense to date was my birth. The next closest thing was probably when I had my adenoids out when I was 7. After that, when I broke my big toe ($900). None of those are akin to having a house burn down or getting in a car wreck. The first two were predictable and all three could be payable with credit or HSAs. It makes no sense to pay thousands of dollars a month so you can go to the doctor for free when it would only cost $150 anyway.