Dear Donald: Here’s How Health Insurance Works

handwritten lettter

Dear Donald (I can call you Donald, right?):

I really appreciate that you think there are certain parts of “Obamacare” worth keeping. Like continuing to be able to cover adult children up to age 26 on your health insurance (I’ve got one of those on our health insurance right now) and ensuring that health insurers can’t discriminate or charge higher premiums based on preexisting conditions.

There’s just one teeny, tiny problem. There is no way to keep the preexisting condition part without also keeping the mandate that everyone has some kind of health insurance.

It might be a little complicated for you, so I’ve done my best to bring it down to a first-grade reading level.

An Analogy for How Health Insurance Works

1) Insurance, any insurance, is based on a risk model. The more people in the risk pool, the less impact the truly risky have on the pool.

Think of it this way. If you put five drops of red food coloring in a swimming pool, there’s no change in color. If you put five drops of red food coloring in a glass of water, the glass turns red.The water is the healthy people who don’t need much health care. The food coloring is the sick people who use the majority of health care. We need those healthy people to dilute the costs of the sick people.

The water is the healthy people who don’t need much health care. The food coloring is the sick people who use the majority of health care. We need those healthy people to dilute the costs of the sick people.

This is why states require that everyone who registers a car show proof of auto insurance. If the only people buying auto insurance were those who needed it (ie, terrible drivers), then it would be unaffordable for everyone.

2) If you don’t require that everyone have health insurance and there’s no penalty for not having health insurance, then healthy people who prefer to spend their money on lattés will forego health insurance. That means the majority of the pool will be red.

3) A red pool only works if you are able to charge those red (uh, sick) people premiums that reflect the amount of health care they will use. Yet, you just said we can’t do that. Epic fail!

So here’s what happens. Insurance companies keep raising premiums for everyone (since they can’t raise them only for sick people). This pushes even more healthy people out of the pool, leaving even more sick people, resulting in even higher premiums and more healthy people diving off the health insurance cliff.

This, dear man, is called the health insurance death spiral. It is a not a dance you want performed at your son’s wedding.

Get it? Good.

Now. . . Can we talk about the 20 million people who will lose their health insurance under the rest of your plan?


For more on the problems with keeping the preexisting condition rule, see this excellent New York Times article.

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