Insurance is there to protect you against high cost, low probability events; basically events where you can afford the expected cost, (probability of becoming sick) x (cost of treatment), but you can not afford (cost of treatment).

If you have a pre-existing condition, (probability of becoming sick) == 1. In this case, insurance is pointless.

I sometimes think that half the problem with employer-provided health care is that people have stopped thinking of it as insurance, as you describe. Instead, you get people who think that they have some sort of right to pay $10 and get $100 of treatment in return, every year, for perpetuity.

The vision plan at my recent open enrollment demonstrated this clearly. You pay $X, and everyone's sitting there determining if they get $X+ back from the plan. And in this case, the vision plan isn't even insurance, because basically the only people going on it have a 100% chance of paying out. And it turns out that if you work the math, for one person, or one person + spouse/SO, you pay in $X and the max payout is $X-, precisely because the probability of payout is so very close to 100%. (This is because the plan only covers glasses and routine eye exams; catastrophic eye damage is covered by normal health insurance.)

(I further note that vision coverage has been one of the most free market of medical endeavors, precisely because of this math.)

How do we know the system is distorted? Because almost nobody actually realizes that this is an insurance system, that you should be expected to pay routine costs out-of-pocket, and that the system is physically incapable of giving everybody in the pool more than they pay in. Unfortunately, this attitude is so ingrained that every government plan I've ever seen also reifies this mindset too, and I think any plan that is conceptualized that way will fail because from the very beginning, you've built it on a shoddy foundation.

We have got to pry insurance away from the employers. (Once again, I note that we've managed to export this problem to the rest of the world. Similarly, I often think that the US would be really screwed by our crappy school system, except that we managed to export it to the entire rest of the world first, so nobody actually has a good system, just slightly different iterations of the same crappy model. "Fortunately" for the US!)

These insights were key pieces of the reasoning behind the HSA program, and most of the Republican Presidential candidates' health proposals, all of which were roundly ridiculed because team Red is out of fashion this year.

When you say "exported to the rest of the world" what countries do you mean? I live in western Europe and health insurance must be covered by the individual, and the school system is a lot better then what I experienced in the US.

Your school system is the same fundamentally broken system of corralling children into a pen and expecting them all to learn the same basic things at the same basic rate. Every industrial society seems to do it this way. I'd argue that some systems are slightly less broken and some slightly more, but compared to what could be, none of them are even close to their potential.

And maybe you should specify your exact country. For instance, France (http://www.npr.org/templates/story/story.php?storyId=9241927... ): "France, like the United States, relies on both private insurance and government insurance. Also, just like in America, people generally get their insurance through their employer." Government health care as seen in the UK is hardly any different from employer health care in practice... it's slightly more disconnected from feedback, but employer health care is already pretty disconnected. So, exactly which country has fully individual health care with no government or employer involvement?

I agree that the basic kind of school system everyone uses is broken (though the quality of pre-university education is low in the US), but the US exported that? I think it predates the US.

I live in Switzerland. No government involvement is not realistic, but in Switzerland you are required to have your own health insurance (changing jobs has no effect on it). The government gets involved by putting a cap on how much insurance companies can make, which makes it less useful for them to use sleazy tricks to try and maximize profits.

As far as the UK being basically the same thing, what system would you suggest? I personally like the Swiss system the best of everything I've seen, but it could be argued that it is just a variation of what the UK has. That is, we all must have insurance, therefor we all must pay for it and the major expenses that people I don't know end up costing me more money. The only real difference is that the insurance isn't government owned and there is some competition in it.

But I can't imagine a system that could work better then these. The only other thing you could do is simply not cover some percentage of the people, but the US is a pretty solid example case that this doesn't work well. I believe that the reason employers are paying insurance is because the plans are already quite expensive and the employers can get a major group discount.

"I agree that the basic kind of school system everyone uses is broken, but the US exported that? I think it predates the US." - it's... complicated. The ideas originated in Europe, but took hold here strongest, then spread with the industrial revolution (later phase, not early phase). That's the short-short version.

"what system would you suggest?" - The Swiss system you describe is what I would suggest. Perhaps not in every detail, because I'm sure you don't capture the full complexity in two sentences :).

The way in which it is not the same lies in the individuals ability to punish their provider, thus closing the feedback loop that markets critically depend on. (Where there is no feedback loop, there is no market, period. Another example: Monopolies are bad because they destroy the feedback loop, because there is no "elsewhere" to take your business.) When the health-care provider is your government, it basically has no reason to care whether you are being served well. (Odds are, the health-care providing part is not even elected so even the only feedback loop a government has is not in play.) It has no competition. In the US, there is only ever so slightly more feedback; technically, if enough of the company complained to HR, they might consider changing the plans they offer, but that's still a very diffuse feedback loop with a central point of failure (HR, easily bribed, or even just overloaded to the point where they can't afford to look at alternatives).

If you're buying insurance individually, and you have the ability to change it as easily as changing my car insurance would be, then you have a market feedback loop, even if you've got the government fiddling around the edges. (I'm only a little-l libertarian, so I'm not necessarily opposed to that, even as I think the US and UK systems are grossly flawed.) For all the rhetoric about the coldness of the capitalist system, you generally get more caring and concern from an entity you can abandon at will than one that gets your money regardless of what you think and has no real incentive to care.

(I also observe this doesn't fix every problem. But what I think it would do is get things moving in the right direction, and create forces that could help resolve the rest. Right now, the dominant forces tend to make things worse and worse over time, instead, as we continually move farther and farther towards guessing what will work... and politicians guessing, no less... instead of actually having the information necessary to figure it out.)

Fair enough, looks like we're in agreement. Oh, and I'll be stealing some of your arguments here next time I'm talking to my swiss friend who supports the Socialist party (not sure how socialist they actually are, but anyway that's what they're called). :)

I too think it would be a good idea to have every individual required to have their own insurance (or the government pays for those who can't) in the US, but first something has to be done about the corruption. I didn't deal with a lot of insurance companies while I lived/worked there, but from the ones I did, more than half tried all kinds of things to get out of paying claims.