ObamaCare's defenders have no idea what insurance is

The point of insurance is not that healthy people pay for sick people. The point of insurance is that you pay when you are healthy in order to reduce your own financial risk when you eventually become sick.

The ideal way to do this would be simply to save your own money, to put it aside while you are healthy so that you have a fund to draw on when you need medical treatment. This would work perfectly, if you knew exactly when you were going to need it and exactly how much it was going to cost. But there’s no way to know this, so everyone faces a risk. What if I become sick before I have enough money set aside? What if I get some sort of cancer that’s horrifically expensive to treat? Hence the need for insurance.

The point of health insurance is not to provide health care. The point is to hedge against financial risk. It is a form of finance. You still set aside a certain amount every month, as you do with savings, but you control for the short-term risk of needing your benefits before you have fully paid for them. Some people will pay premiums for only a few months before they need the benefits. Others will pay for decades without needing them. You accept this because you don’t know ahead of time which one of those people you are going to be.

But you can make calculations about which one of those people you are likely to be. So you want your premiums to be correlated to your own level of risk and not just be a slush fund to be “shared” with others, because that looks a whole lot like getting ripped off. If you find yourself required to pay extremely high premiums while you’re still young and healthy and with a healthy lifestyle, and therefore with a very low risk of using much of your coverage, then you may well decide you’re better off without insurance. The steep premiums you are paying are not justified by the relatively small amount of risk they defray. Even if there’s a penalty for failing to buy insurance, if the penalty is small enough—and Obamacare’s architects didn’t have the guts to make it as big as it really needed to be—then you’re going to decide you’re better off just paying the penalty.

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