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Saturday, September 19, 2009

An Example of Damaging Government Regulation of the Insurance Industry

This post on David Z's shared items reminded me of an important point.

Most health insurance corporations do *NOT* have a choice regarding "Which drugs are covered?" and "Which treatments are covered?" It's mandated by law.

In turn, this guarantees that healthcare is expensive. If an insurance corporation is required by law to cover the latest blockbuster drug "cashcowazine", then they're forced to offer high premiums.

Insurance corporations don't mind this regulation, because they merely pass the cost on to customers as higher prices.

Customers don't have a choice. They have no choice but to buy an expensive policy. If you want to buy an insurance policy that only covers hospitalization or serious illness, but not routine medical care, that's not available.

The purpose of medical insurance should be "guard against disasters". Instead, health insurance covers *EVERY* medical transaction. This evolved from the health insurance tax loophole.

After World War II, corporate employers started offering health insurance as a tax-free perk. At the time, this benefit wasn't explicitly tax-free. The income tax law was amended to allow this tax-free benefit. This led to the custom of everyone getting health insurance from their wage slave job. Since it's a tax-free perk, the incentive is to cover everything, even routine medical care.

True insurance is protection against disasters, and not to cover routine expenses. The State completely perverted the purpose of health insurance, making it mandatory even for routine health care. Most people aren't directly paying the cost of medical care, leaving no incentive for efficiency.

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