Thursday, June 29, 2017

History of Insurance

The first known insurance contract dates from Genoa in 1347, and in the next century maritime insurance developed widely and premiums were intuitively varied with risks.

The Insurance Business Model has always based premiums on risk. Premiums go higher with rises in the incidents of claims and the total cost of claims. 

Insurance is a “cash-flow” device that allows purchasers a chance to “self-insure” some of what they might lose, but decide how much coverage they need. This works for the Insurance carrier and the purchasers.

US Health Insurance doesn’t operate that way anymore. Subsidies and cost-shifting have contaminated the prices charged by providers for healthcare.

All other forms of insurance charge higher premiums to those purchasers who have had large or recurring claims. We see this with auto insurance, home insurance and every other kind of insurance we buy.

The Senate Healthcare Bill removes cost-shifting from the young and healthy and transfers up to 500% of shifted cost to purchasers who are in their 50s and 60s. They are doing this because “that’s where the money is”.  It won’t work. The healthy 50 and 60 year-olds will move to health savings accounts and the highest deductible low cost catastrophic plans they can find. 

The Senate plan gives the sickest 5% who spend 50% of the money no incentive to demand lower healthcare costs. This means that the 50% who get their health insurance from their employers will get no relief until Providers are forced to reduce costs based on supply and demand.

Norb Leahy, Dunwoody GA Tea Party Leader

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