The Red Dirt Liberty Report: Pre-Existing Conditions

The Red Dirt Liberty Report: Pre-Existing Conditions

Having lived nearly all of my life in the State of Oklahoma, I’ve become accustomed to a red tint to the soil that surrounds me. We have an abundance of the iron-rich stuff here; as a consequence, there are a lot of businesses named “red dirt” this or that.

So, from Norman, Oklahoma, here is my first Red Dirt Liberty Report.

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The United States seems to enjoy placing the majority of its forced labor onto businesses. We require businesses to do the vast majority of our tax collections (at their own expense and without pay), and we also require them to provide health care coverage (if they have more than 50 employees), also at, for the most part, their own expense. It’s a great benefit to offer employees, but it presents a lot of problems when it becomes a required benefit.

When a person has health coverage and either leaves or loses his job, his health coverage, through his employer, does not transport with him to his next job, or continue in force (except through COBRA) when he does not find a new job.

This creates an actuarial problem. This person now may already have existing health conditions that need coverage, but with the termination of a health plan, by current law, any new coverage must pick up the costs of any pre-existing conditions. This is one of the portions of the old Obamacare plan that has been continued by House Republicans.

Many libertarians argue that requiring insurance companies to cover pre-existing conditions is basically the same thing as allowing a person to purchase coverage for a house fire after the house has already burned down. There is a bit of a difference in that the house fire is a single event, whereas the health issue is an ongoing problem. This doesn’t even address the fact that there are always cause and effect issues within the human body where one issue can cause another, and many times insurance companies will consider any related issues to be pre-existing.

However, there is still a good point to this libertarian argument –  that the purpose of insurance is to insure against an actuarial risk and is not intended to cover certainties.

When you have a health issue arise on your current health plan, the plan was using actuarial analysis to determine the risk of this happening, and thus was included as a cost in your premiums paid by your employer. However, if you change and get a new health plan, that health issue is now a certainty, and not a risk. Therefore, if the new plan is required to cover it, the cost is borne by all the members of the plan rather than being a part of the actuarial calculations for risk. You’ve simply asked everyone else to pay for your health costs on that particular issue.

It’s a serious problem, not only for the members of health plans that must pay higher premiums, but if pre-existing issues are not covered, there can be enormous costs to people who have had things happen that are not their fault; things which would have been covered if they had been able to keep the same job. The problem isn’t the direct covering of pre-existing conditions; the problem is more that the US has tied health coverage to employers rather than having it tied to individuals in a free market place.

If your coverage goes with you no matter where you work, you no longer have to change health plans, and therefore, you no longer have to worry about pre-existing conditions.

Health insurance is a very nice benefit that many employers want to provide to their employees, and that’s great; however, requiring the coverage to come from each individual business, means that the coverage will always change whenever a person changes jobs.

By not requiring businesses to pay for the coverage, many could instead pay for part or all of the cost of individual plans that are portable and move with the employee from place to place, while some businesses may still choose to cover some or all of those costs.

The reason individual insurance coverage is so extremely expensive is primarily due to the fact that the risk pool of people looking to purchase individual coverage has a much higher average risk than the general population, for many reasons. An influx of people seeking individual coverage would lower premiums with a decreased averaging of risks, and market forces would bring the costs down. If employers are not forcibly required to purchase insurance for their employees, employers would adjust their wage scales in a manner that attracts the same level of employees, that pay would likely increase to offset the cost of people paying for their own coverage (or many employers would cover the cost of their portable plans for them).

For those people who are still stuck with incredibly high health costs from existing health problems, it is cheaper to have a special program to help them cover these expenses than it is to require members of health plans to cover the costs of pre-existing conditions.

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Danny Chabino

Danny Chabino has a background in operating small businesses. He has been involved in managing and/or owning the operations of multiple retail establishments, a sub-prime lending company, a small insurance company, a small telemarketing venture, and insurance consulting. In addition to these activities, he also has spent many years managing investments in stocks and stock options as a successful trader. He is the married parent of two adult children, living as a proud lifelong Oklahoman and a part-time redneck. Danny writes for the enjoyment and pleasure of sharing ideas and for the love of writing itself. His opinions skew libertarian, but he enjoys hearing open debate and listening to or reading of opposing ideas. As an odd confession, he personally detests politics, but enjoys writing about political ideals and philosophies.

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