If everyone did this, health insurance rates would drop drastically for pools of young, healthy individuals and rise drastically for the old and the sick. Which somewhat defeats the point of insurance - spreading risk over large, heterogeneous portions of the population.
I would argue the word has been bent and beaten far out of its original shape into something close to what you're talking about, especially in health. It's not insurance as much as assurance. You don't pay in early in life to get the expected value later in life. That would be insurance. You fight to try and get more than you deserve when you're above the life expectancy, if you're good at paperwork. If you're bad at paperwork or a smoker, you're the one whose early death frees the medical resources and insurance money needed to pay for the one who's good at paperwork, less a fee for the broker and all the rest.
In this second meaning of "insurance" you're right, the point is totally defeated because nobody will want to "insure" a sickly old man's health just as nobody in their right mind will write fire insurance for a cigarette.
It could be across a pool of investors, as you describe in the spice-trading example. Nobody wants to self-insure because of the chance of a huge catastrophe taking out their ship and netting them a huge loss and likely a lifetime of debt.
It could be across a pool of investors, as I describe in the health-insurance example. Nobody wants to self-insure because of the chance of a huge catastrophe putting them in the ER and netting them a huge loss and likely a lifetime of debt.
The reason we leave it to big organizations currently is because they have the resources (data, underwriters) to accurately asses and price risk. They charge a fee to do this. They are allowed a certain amount of extortionate leeway due to government regulation mandating certain minimum amounts of insurance, which you allude to in arguing with companies for reduced rates.
Things we could do to make the system better:
1) Reduce barriers of entry for doctors
2) Stop prescribing unnecessary treatments/prescriptions
3) Better education regarding health choices
4) More taxes/tradeable permit system for companies that pollute bodies or the environment (McDonalds, ADM, Dow Chemical, Bayer)
If you really want low health bills:
Do all that boring stuff you constantly read about, like brush, floss, eat right, exercise, and only drink in moderation. Do not ever get rip roaring drunk. Especially do not drive or engage in other dangerous activities while drunk or high. Don't sleep around casually. Don't ride a motor cycle. If you want to go hiking in the mountains, take the appropriate precautions and do not drink or do drugs.
A lot of claims will not be covered anyway if you were drinking, taking drugs or engaging in risky behavior (parachuting, mountain climbing). And keep in mind that insurance only protects against financial loss, and only to a limited degree. If you permanently maim yourself doing stupid crap, you will not only be stuck with high medical bills and reduced odds of making a good income thereafter, you are also permanently maimed, duh. Living with chronic pain and other issues of that ilk still sucks majorly, even if you win the lottery and are set for life financially.
/boring old fogey
I have been rip roaring drunk, once or twice. It wasn't any fun and then I was sick afterwards.
I have hiked up mountains, in spite of a fear of heights. I did it sober and took appropriate precautions.
I am not suggesting you not have a life. If you want to drink, you can. You just need to have a designated driver or call a cab. If you want sex, you can have that. Just not with random ass strangers whose histories are total unknowns.
I enjoy my life. And I have very few regrets. I think "fun" that leads to regrets = you are doing it wrong.
But I was like that before I paid accident claims. Paying them just made me more confident that I am right.
Edit: I am genuinely curious what fun you think I am missing out on, though perhaps that is not clear. I really wonder what you think I am not doing that somehow makes my life less fun. Because I sincerely do not see it.
I imagine if you and I had a good looooong talk, our positions would not appear so far apart. However, this is not the place for that.
Take care.
You might have included a clause where you can release a member from the pool for a high one-time cost from each of the other members.
At the end of the day, you would undoubtedly be liable to pay in one form or another for a portion of those treatments, unless the friend felt bad and voluntarily left the insurance group.
Insurance among friends would be weird, mixing emotional and purely mathematical calculations.
When participating in a larger insurance group, these same costs are born solely by insurance premiums. But the costs are not the same - big insurance companies have negotiated lower prices across the board. Your group cannot.
I see p2p insurance as a total loss, because in time of need they cannot possibly pay.
The whole point is that everybody has coverage under a high deductible standard insurance plan (which will be significantly cheaper than a low deductible plan), and then the group shares the risk of the deductibles.
Best case, everybody pays less for insurance (including what they pay into the p2p pool). Worst case, someone gets sick and busts the pool (and gets kicked out if it's chronic), but everybody still probably paid less overall. Not sure how well this works if the person who got booted can't get their deductible reduced.
I think health insurance is weird in a number of ways for this. It'd probably be great for e.g. homeowners insurance.
Nowadays, health insurance is really "assurance" sprinkled in with a doctor subscription (as daniel-cussen mentioned). With that in mind, a hypothetical plan design would collect premiums that bundle reserves, a concierge medicine program, like HealthTap, and critical illness insurance, cancer, and/or accident insurance. These insurances only cover specific incidents for the immediate term. Once someone triggers one of these events, you could push them onto the exchange where the larger risk pool would then cover it on an ongoing basis.
Whether or not that would be ethical is up to you...
From an economical standpoint, depending on your area's availability (read urban centers), you could likely put together this entire package for a collective and pay the ACA tax for less than an ACA approved plan.
Though the set of ~5 seems to expose you to a lot of risk still. What if the size of the set were increased such that the risk was 1 in a million rather than 1 in five.
What if the set of those insured was almost the size of a population?
Not only would you have spread the risk greatly and reduced cost, but you'd probably benefit from collective bargaining power to be able to reduce the costs that you were exposed to.
Sounds like a good idea all round.