The Insurance Mandates

By Author: Marcus Stalder
Total Articles: 491
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Over the last year, everyone has been talking about the health insurance mandate. This is either the worst idea since Karl Marx wrote his first book about communism, or it's the only thing that can save Americans from a collapsing healthcare service. The one word you can never use in this context is "truth". Everything is interpreted depending on your political beliefs. So let's take the basic idea. Insurance is all about spreading the cost of risk among a defined group of people. So, suppose that a group get together. They all own warehouse and storage facilities but are worried about fire. They all pay into a common fund and, if one building burns down, there's enough cash to pay for repairs and the replacement of stock. This is a simple and well-tested plan.

When we apply this to vehicles on our public roads, all but three states have mandates. This is what we call "financial responsibility", i.e. if you decide to do something that might cause loss to a third party, you should be responsible. That's more than having legal liability to pay. You should have sufficient insurance to pay for repairs and medical expenses. ...
... The theory says that, if everyone pays into the funds kept by each insurer, there will always be enough to pay out on all the claims. Because the insurers are for profit, they have mostly managed to make a profit and pay out a dividend to the stockholders. This has been working well in most states for more than fifty years. Although there are one or two problems emerging as professional gangs are planning elaborate frauds and driving up the costs to the insurers and so to the policyholders. Taking the overview, we can see benefits to all.

Yet, when it comes to medical insurance, the argument breaks down. In theory, it should be the same as auto insurance. If everyone pays into a central fund, there will always be enough money to pay for medical treatment should there be an accident or illness. But there's a difference. If we go back to the businesses, no one forces them to set up and run warehouses. It's their choice and it's for them to organize insurance if they are not prepared to pay for loss and damage out of their own pockets. It's the same with driving. There's no obligation to drive. In a big city, people can and do rely on public transport. Yet you don't have a free choice about whether you fall ill. You can play dangerous sports or go to parts of the country where there are risks of disease, but no one decides to fall ill. Thus, according to the conservatives, forcing everyone to insure is wrong in principle. People can always pay for their own treatment. It should be their decision whether to insure.

No matter who is right, the car insurance mandate is not going to be challenged. It has been a part of our lives for more than half a century. We all accept it. That said, the mandate should be properly enforced. As it is, there are too many uninsured driver on the roads and this forces up the car insurance rates for the rest of us.