Originally posted by whodey
In other words, insurance companies see to it that they turn a profit from their business as where government is more than happy losing money on the endevour. Brilliant!!
what telerion was saying is this:
Suppose you are an insurance company. There are two pools of people you're offering insurance. Group A is made of entirely of people who are young and-or very healthy. Group B is made up entirely of people who are older and already sick.
You do a study that shows that the typical person in Group A will spend about $1000 per year on healthcare - and the typical person in Group B will spend about $25,000 per year on healthcare.
If you want to make a nice profit on insuring Group A, you can charge a premium of $2000-yr. But if you want to make a profit on Group B, you'd have to charge a premium of greater than $25,000-yr.
Insurance companies generally want to avoid people in Group B (way too much risk), or they charge them extremely high premiums. Either way, it leaves almost everyone in this group unable to afford insurance they need.
To rectify this, we can ban insurance companies from discriminating against sick people -- we create a new Group AB and insurers have to offer everyone the same deal at the same price. A study is done and it finds that the typical person in this combined group will spend $9000-yr on healthcare. So the insurance company charges a premium of $10,000-yr.
Let's assume that everyone in Group AB can afford coverage at this price (government offers subsidies for those who are poor). But almost everyone originally in Group A is totally uninterested in paying $10,000-yr when they only expect to pay $1000-yr - so they all essentially drop out of the pool.
The result is that we're essentially back to Group B again. For the insurance companies to make a profit, they'd have to charge those high premiums that almost all of Group B can't afford.