An Iowa professor thinks using the term “health insurance” to describe typical health care policies is a bit of a misnomer because it’s become more of a cash management tool than insurance.
According to Ty Leverty, assistant professor of finance in the Tippie College of Business and Tristar risk management fellow, health insurance differs from other types of insurance because it often pays for routine expenses such as annual check-ups or cholesterol tests. “That’s like asking auto insurers to cover the cost of a tune-up,” Leverty said.
Another way health insurance is different is that people expect it to pay for small things like a flu exam or wart removal. “We don’t expect our auto insurance to pay for the costs of replacing a burned out headlight,” Leverty said.
Third, health insurance differs because many Americans get it through their employers, not on their own. As a result, he says, a lot of people don’t really know how much they’re paying for it, and thus, don’t know how much their health care really costs.
Leverty says the parts of the policy that pay to cover injuries that truly are unforeseen, such as catastrophic illnesses, are the real insurance.
“Insurance manages risks that are unknown, such as a house fire or an automobile accident, by transferring them to an insurance company in exchange for a premium,” maintains Leverty. “The insurer, in turn, manages the risk by pooling together a large number of risks. Health insurance, however, frequently covers things that are known.”
One more thing. According to Leverty, many people like their health insurance because they have never really tested it for uncertain events. “One only knows how good their insurance is when they really need it,” he suggests.
The article stirred up quite a debate on Insurance Journal’s Web site (www.insurancejournal.com) when it appeared on Sept. 11. Not all readers agreed with Leverty, including the reader who reminded everyone that people do not have interchangeable parts like cars do. (So much for transplant coverage.)
One reader commented that property/casualty insurers might learn a bit from health insurers about prevention.
Another noted that where there is no underwriting, there is no insurance, so that what many see as health insurance might better be called “prepaid healthcare delivery systems.”
P/C insurers might use their influence like health insurers do to create more provider networks to control costs, suggested another. Another called for a better deal for those with individual health insurance policies: “Just cuz you work for Sony doesn’t mean you are a better risk than if you work for Joe’s Barber Shop.”
Some of the commentary revealed broader truths and concerns about the nation’s health care system. Only a few couldn’t resist bringing up politics. But for the most part, the conversation stayed on track. Check it out. It’s just one example of what an insurance discussion forum can be.