Insurance: Moral Matters — Not Just Money

Markets for Insurance

Markets are fantastic for some purposes, but not for everything. Suppose you have health insurance with your job, an develop a chronic disease. Then you get laid off, and start working on your own. You will find it next to impossible to get insurance for your illness because insurance is for risks, not for for certain problems. Even if there were time you could not by fire insure for a burning house.

Another problem with medical insurance is that insurance companies profit from not paying claims. So they spend a lot of money—your money—avoiding payments and you have to spend a lot of time trying to get paid. This is not how a normal market works, and economics tells use there are serious problems with some (not all) insurance markets.

Health insurance is one such market, and it works better if the government provides basic health insurance.

A Few of the Market Failures in the Health Insurance Industry

  • If you get a chronic illness, try to use your insurance and find out your insurer is terrible, the free market will not let you quit and buy insurance from another company.
  • If you start collecting on your insurance (instead of just paying), the insurance company has a motive to avoid paying and to make your life miserable.
  • If you lose your health insurance after you get a chronic illness, it’s almost impossible to buy insurance.