Health Insurance, Adverse Selection

Americans have gotten spoiled over the past 50 years with the use and function of health insurance. In the 50's, Ford, General Motors, IBM, Coca Cola, US Steel and other large firms began offering health insurance and other insurances as benefits of employment with the respective firm. It became a one-up-manship within industries in order to attract and keep talented, qualified employees. As Americans, we came to expect health insurance as something you have through your employer and the employer took care of the premium. We had/have no idea of how much health insurance truly cost because we were not paying for it. Companies would richen the plan through low deductibles, low co payments and large provider networks in order to make "us" happy. It was not until we were laid off, terminated or quit our employer did we realize the true cost of health insurance. That alone was enough to get a resume out to any company that had was hiring.

Group health insurance plans are more expensive than individual plans due to one important factor-guaranteed issue. Group plans offer health coverage to all eligible employees regardless of current health or pre-existing conditions. If you had a heart attack last week and just started your new job this week, the health insurance has to accept you through the employers group health insurance policy and pay for the heart attack treatment. That increases the cost to the plan when it comes time for the insurance company to review the past years claims. If you had the heart attack before starting the new job, the health insurance company cannot decline coverage to you.

Individual policies, non employer sponsored plans, are not guaranteed issue because of Adverse Selection. If you were diagnosed with cancer today, had no coverage in place, then applied for insurance, you would be declined. Same as if you had no car insurance today, hit another car then went to an insurance agency to apply for car insurance requesting to have the insurance company pay for the damages you caused earlier. Insurance has to be in place at the time of the loss for the insurance to cover the loss. Insurance 101.

Insurance is important to our American way of life. It offers protection against the things we do not expect. However, it seems health insurance has become a naturalized right of all Americans. Unfortunately, it is not a right but rather a mechanism for protecting our assets from total or partial loss which we are responsible for paying on our own.

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