When you think of the word “insurance,” what do you think of?
Strictly, to insure is a financial transaction: a cost paid to another party to bear the risk of a loss.
In its common-sensical application, this makes a lot of sense: if 10 merchants, each owning a ship, are sending cargoes across seas that routinely claim one in 10 ships, they should all happily pay someone about 10 percent of the value of a ship and cargo to carry the risk for them.
But then there’s health insurance, where the little-understood distinction between “insure” and “ensure” gets especially devilish.
Health insurance doesn’t ensure our health any more than Lloyd’s keeps ships afloat. What we really want from it, though, is to receive the care that we need, when we need it, without going bankrupt.
And so, in the United States, we end up in this situation (as reported by the FT’s Lex columnist last week): “hospitals haemorrhaging money — to the tune of $50bn a month according to one industry study,” while “The country’s biggest listed health insurers — UnitedHealth Group, Cigna, Anthem, and Humana, have collectively added about $160.5bn to their values since the pandemic began in earnest in late March.”
Why? Because everyone who can possibly avoid going to hospitals for what used to pay their bills — routine, elective, and even some formerly emergency procedures — is doing so, while the insurers are still collecting premiums apace.
This is totally perverse, and it beggars the common-sense understanding of insurance. (If all shipping stopped, you can bet the merchants would be doing their damnedest not to keep paying 10 percent on cargoes languishing safely in port.)
If we really want to ensure that Americans can afford to get sick and have a chance of getting well again, we’re going to have to think hard about what role — if any — todays insurers have to play.