Health Care Reform: Getting Our Language Right

The headline has changed from “health care reform” to “health insurance reform” because politicians can’t go wrong politically by firing salvos at health insurance companies.  People aren’t fond of the institutions that handle the majority of the money paid for health services even if they are happy with the care itself.   Unfortunately, calling the leading proposals in Congress insurance reform is false advertising.  The basic flaw is that insurance for medical expenses will no longer exist. 

If the Commissioner of Baseball announced “baseball reform” that included elimination of pitching, batting and fielding, we would no longer have baseball even if there was a ball and bases involved.  Similarly, the leading Congressional proposals violate key principles of insurance by prohibiting underwriting, pricing, and product design based on risk assessment.

Why does this matter?  Because the absence of a true insurance product and the lack of a private, competitive insurance market will mean that the program will not work as intended to provide improvements in affordability and availability of medical expense reimbursement. 

The essence of insurance is the transfer of risk and individual risk assessment for losses that for any given individual are unexpected and unpredictable.  As Sherlock Holmes explained to Dr. Watson in The Sign of the Four:

while the individual man is an insoluble puzzle, in the aggregate he becomes a mathematical certainty.  You can, for example, never foretell what any one man will do, but you can say with precision what an average number will be up to. Individuals vary, but percentages remain constant. 

Legislation that ignores the great detective’s words cannot rightly be called insurance.

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