re: #381 Gus 802
Insurance is a bet. The insurer bets you won’t get sick. You bet you will. The insurer will lose money if he plays this betting game badly. Then he’ll go under.
Insurers have tables of odds, just like with horse racing or any other gamble. They have learned that the exceptionally large or small are a bad bet. The baby may well have some sort of major health issue that is driving this growth and will in due course cause serious health problems. Or not, but they do have their tables. They’re not in the business of selling coverage that they know, ahead of time, is likely to cost them a lot more in benefits than the premiums they stand to collect.
The rational course for the family is to just go without insurance, and if the company is wrong about this bet, they’ll simply have saved themselves some premiums. If the insurance company is right, then they have no grounds for complaint against the insurance company, which is not a charity. They can then appeal to real charities for aid, and one would hope it would be forthcoming. Their situation is a perfect fit for charity, because there’s no issue of moral hazard here.
Capitalism is very good at what it does. Charity is not one of its talents. It can’t be, when you think about it. Charity has its place in the world. It’s indispensable. Government cannot take the place of charity: consider the folly of government flood insurance, which has become the means by which the rich build beach houses on hurricane prone gulf coast frontage, and rebuild, and rebuild, each on the taxpayer’s dime. That, in the name of charity.
Capitalism cannot do what is properly the work of charity. This situation makes that clear. And regulation cannot do it either. If the State steps in and rules that no child may be excluded from coverage, then parents with healthy children will wait until the hour of need to buy “insurance”, and with no solid premium base of healthy but cautious insurance customers to offset the losses the company takes on sick people, the company will go under.