A Good Way to Bankrupt Healthcare...

...is to force insurance companies to insure those with pre existing conditions. That is one of the pillars of Barack Obama's health care plan. First, let me let everyone in on the basic premise of how insurance works. Insurance companies insure that which they expect to happen rarely. As long as they get enough clients, whatever behavior they cover should be rare enough to be profitable. For instance, auto accidents are fairly rare. As such, auto insurance is quite profitable if the insurance company has a large enough base of insured drivers. If, of course, someone becomes accident prone, then they become difficult to insure and usually aren't. It's the same reason why life insurance is much easier to get for a young, healthy person.

So, what would happen if insurance companies began to take on folks with pre existing conditions en masse? Well, unless they charged each of them rates no one could pay, it would become a losing proposition for the insurance company. They would have to make up those losses else where. As such, the rest of the population would have to pay for the losses incurred by insurance companies being forced to cover those with pre existing conditions.

Think about this another way. Let's compare coverage for those with pre existing conditions to the mortgage crisis. One of the basic reasons we are in this mess is because banks lent to unqualified borrowers. In fact, we can see from the crisis just how devastating it is when a financial institution takes on unqualified clients on any mass scale.

So, what is an insurance company doing by insuring those with pre existing conditions en masse? They are doing the insurance version of lending to unqualified borrowers. I am not saying there will be a meltdown in insurance, because, frankly, no one has ever forced the insurance industry to do this. In fact, it is fairly unprecedented for the government to mandate to any private industry who should be their client base especially when the niche of clientele is so obviously unqualified for their product. The effects of such a move couldn't be measured until it is too late frankly. Yet, the precedent for the consequences has been clearly laid out by the mortgage mess. Someone with a pre existing condition is no more qualified for insurance then the average sub prime borrower was qualified to receive a loan during the height of the niche.

Yet, that's exactly what Barack Obama wants to force insurance companies to do. So, what if insurance companies begin to fail en masse as a result of this clearly bad business decision? Well, given their vitality in our society, they would have to receive a bailout. After all, they would have failed due to a government mandate. Either that, or he will mandate that the government provide health insurance for folks with pre existing conditions. Then, the tax payers will be on the hook for this financially losing proposition.

The reason that his proposal is so dangerous is because politically it is a total winner. It makes him look like the compassionate candidate who is looking out for the downtrodden. Anyone who opposes mandating insurance for those with pre existing conditions is mean and cruel. It's much more difficult and politically dicey to argue that the costs of such a proposition are too high, than it is to argue that everyone, even the most vulnerable (like those with pre existing conditions), deserves affordable health care. That's because the benefit to society is clear, while the costs are much more difficult to ascertain. The insurance companies are unsympathetic while those that are sick are quite sympathetic. Yet, compassion without practicality is often the most destructive idea. While forcing insurance companies to provide for those with pre existing conditions is compassionate, it is also not practical. It's also a great way to bank rupt the system.