Health insurance isn't like auto insurance….

We often used the “auto insurance” example when talking with people about their health insurance; here’s another interesting take along those lines, but with a slightly different twist, that I’ve excerpted from David Racer’s excellent blog:

You’ve likely heard it. “If the government can mandate auto insurance, then why do you say it cannot mandate health insurance?”

There are at least four major differences (and be sure to read number 4, because it is the most critical):

First: The FEDERAL government does not mandate auto insurance. States mandate it. And three states have chosen not to do so. Auto insurance, like health insurance, is a state issue.

Second: The mandate for ownership of auto insurance only covers what the driver might do to someone else. It is liability insurance, not collision, comprehensive, glass, or preventive maintenance. To be like the new FEDERAL health insurance law, auto insurance would have to cover routine maintenance, parts replacements, and just about everything else.

Third: Even though 47 states mandate auto insurance coverage, the average uninsured rate, according to the Congressional Budget Office, is 14.6 percent. (Actually, I believe that estimate is very low, considering that in California and Texas, it exceeds 25 percent.) The uninsured rate in our mostly voluntary health insurance system has held steady at about 15.5 percent or so for a decade.

Four: Auto collision insurance is somewhat like catastrophic health insurance in that it will pay to fix damage from an accident. But it never pays more than the value of the car (there is no limitless benefit).

If an 85-year old man wraps his $3,500 car around a tree, and the car suffers $4,000 in damages, the insurance company pays the old guy $3,500. The auto has a finite value (for cars, often called its “blue book value”).

What if that 85-year old man breaks his bones, and what if health insurance worked like auto insurance, though? How much would they pay? What’s the old guy’s “finite, ‘blue book,’ value?” …..

Health insurance is not auto insurance: So you get the picture. Auto insurance deals with predictable, finite cost. It is a state issue, not a federal issue. And when the cost of the insured item exceeds its finite value, it is cashed out. Why would auto insurance companies cap payments at the value of the auto, and not offer limitless coverage, preventive care, reimbursements for worn out engines and transmissions? Because no one could afford it.

If you’re confused about health reform or simply want to know how it might impact you & your family, give us a shout at AC Forrest Insurance Group.