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Comment by nolepointer | Hacker News Reader

>Or even better, that healthcare costs are low enough that you don't even need insurance

See, this is what I don't get. I'm fairly inexperienced with this stuff, but it's starting to become relevant in my life. Despite my new employer offering insurance, I'm staying on my parents' until I'm 26 (this was part of their policy even before Obamacare).

However, this is the question I've been asking ... why do I even need health insurance? Why can't the money I pay in the form of premiums just be used to pay for my health care? The answer: well, it can be really expensive, so this way the cost is shared. But why is it expensive? Why don't I ask how much something is versus whether my insurance will cover it?

Again, like I said, I don't have a lot of experience, so go easy on me. But I think my questions are valid.

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Part of health insurance is a bit like fire insurance on your house. There is a really small chance that your house will burn down next year (say 1 in 10,000) but if it does you'll lose a ton of money (say $500,000). So you pay $55 to get a year of fire insurance (500,000 / 10,000 = 50 + 5 in profit for the insurance company).

This is a great deal for you. $55 is no big deal and now if your house burns down you don't suffer a tremendous financial loss.

Similarly there is a really low chance you'll get cancer next year. But if you do it could cost a ton (millions of dollars possibly) to treat. So insurance is a good deal for this too.

Now, in the US 2 other things get lopped on to health insurance that make things a bit more complicated:

1) For a lot of people health insurance covers cheap and predictable expenses like an annual checkup. There are a lot of people that think using insurance for this is a bad idea. But some people think it's a good idea. It's complicated.

2) Health insurance (especially after Obamacare) can be a form of social insurance where healthy and/or rich people pay more than they otherwise would so that unhealthy and/or poor people pay less. This reduces economic inequality. There is a lot of political disagreement about whether this is a good idea.

Did this help? I've glossed over a ton of details but maybe it's enough to get started.

Yes, quite helpful, thank you. "True" insurance (car, fire, flood, etc.) makes sense to me, but health insurance is much more complicated. I guess it's point 1 that never made a lot of sense to me. So, I suppose you can put me in the group that considers it a bad idea to use insurance for such purposes.

It's worth noting that #1 and #2 from my list can get kind of mixed together. If you're poor enough maybe an annual doctors checkup is a big expense for you. So maybe government subsidized health insurance should just cover it for you so that small health problems get taken care of before they turn into big problems(1). And once you're bundling this stuff in for poorer people you might as well just bundle it in for everyone.

I'm mostly with you in that I don't necessarily think this is a great idea, but that's the general thinking.

1. Though there is less evidence than you might think that this actually works.

Don't forget babies. Child birth is expensive and the reason why young women had to pay more than young men pre-ACA.

Also, skipping your annual health check ups is bad for your insurance company in the long run, so this, at least, they have a huge incentive to make sure you go.

Most people are interested in health care and not health insurance, meaning, we know we are going to use the doctor for something...it isn't a big surprise when your wife gets pregnant (well...I mean...). It isn't a big surprise when you start breaking down toward the end of your life, which is why ~40% of our health care is already socialized via Medicare.

Ya, babies/pregnancy are (in my mind) a subset of my point #2. For those (and a few other) reasons women tended to pay more for health insurance then men so some people are in favor of a social insurance system to even that out.

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