The basic idea of insurance is that people in a block have certain risks. They pay the costs collectively, and collectively the costs are predictable. The alternative is some few of them have life-destroying costs.
As someone who has worked in an actuarial department, I have sympthy for companies which won't insure pre-existing conditions. You don't get to insure your house after it catches on fire. On the other hand, fire insurance companies don't try to cancel your coverage after your house catches on fire either.
A horror story in a recent diary describes how health-insurance companies are doing the equivalent. This is not only heartless, It contradicts what they are selling. They are charging you to take on the risks; if they are avoiding the greatest risks without stating that explicitly, they are committing massive fraud.
More details after the jump.
Generally, you (or your employer) buy health insurance to pay for whatever health costs come up in the future. If you get one of several serious illnesses, you can't buy health insurance thereafter to cover the costs. That is fair.
But the other side of this fairness is that if the illness develops while you are insured, the insurance company should cover the entire cost of treatment -- however long it takes. Raising your rates -- or your employer's rates -- to the pay for the coverage is immoral; it should be illegal. Your premiums while you are healthy are paying for the risk.
---------------------Now, a public option should not -- and, almost certainly, will not -- behave in the fashion that private insurers do. It will pay for all illnesses that develop while the insurance is in force. That means, that it will pay out more than private insurers currently do. That explains why the industry fall-back position is to require that the public option pay for itself fully. They figure that they can drop their rates below those of the public option and make a healthy (sorry!) profit from the money they save through recissions and rate raises on the employers of the sick.
---------------------ASnother game that rewards insurance companies by ignoring the idea of insurance is embodied in the Bush plan for Medicare part D.
Various "insurance companies" pay for diffiernt medicines. So, if your doctor prescribes you medicine A, you buy part D from company X; if he prescribes medicine B, you buy part D from company Y.
But this is
notinsurance. Insurance would be something you buy before you come down with the disease that pays for whatever medicine your doctor prescibes to treat it.