image credit: AARP
My father was an insurance claims adjuster. He was also an extremely ethical man. When a claimant tried to overstate the damage from a fire, or lie about that diamond necklace, which actually may not have been stolen, it angered him greatly. I came to hate insurance because of what his role in it did to him, and his health. Yet, he was a steadfast supporter of the concept of insurance and he was a company man. And, he saved his company millions of dollars in claims by applying his moral code of fairness to every case he worked for his non-union white-collar working class salary.
I discovered later that he was acknowledged as the top claims adjuster (and by its nature, detective) in Los Angeles County, when after most of his career he was laid off because the corporate executives wanted all of their adjusters to have college degrees. It’s the image, you know. That was my initiation, as a child and young adult, to the insurance industry in the 1950s and ‘60s.
However, because of my father’s career, I was also exposed to some of the history of insurance in the United States, as well as its contemporary practices. Early on, what would become giant insurance corporations had often begun as small “mutual assurance associations.” During the early waves of immigration to the U.S. from Europe toward the end of the nineteenth and beginning of the twentieth centuries when industrialization was accelerating, various immigrant ethnic groups formed simple associations to which each member contributed a small amount of their earnings to a mutually held fund from which members could be paid out a benefit if some calamitous event such as a fire or serious sickness befell them.
Shared Assurance of Risk Protection: A Public Good
Each member of such community associations contributed a small portion of his earnings to the fund, not on the assumption that he would accrue a certain share-value from their contributions, but as simple form of pooled risk-contingency protection. The association did not owe anyone their contribution; it owed them a payment if an insured event occurred. There were variations on this theme, of course. But the general principle of risk reduction through the distribution of the cost of that risk among the members was the guiding standard of mutual assurance associations. In a fundamental sense, such sharing of risk in a community—or in a nation, for that matter—is a public good for the population involved.
One of the facts about social life is that certain things are inherently public, while others are inherently private. Roads and sewers, for example, are clearly public goods, as are electric and gas utility systems. I have always been amused, as well as annoyed, by the fact that too many people who confuse that distinction and want to privatize every public function, are the same people who 1) complain about having to pay taxes, and 2) complain about potholes not repaired in the roads when taxes are cut beyond budgetary needs to provide the service.
Taxes have a structure very similar to insurance. They provide a collective capacity to produce a public good, such as roads, water and electric service, etc., that would be very difficult, if not impossible for individuals to provide for themselves, especially in cities, but also in most farms. The federal Rural Electrification Act of 1936, was a god-send of American agriculture. It provided electricity to rural areas that could never have acquired it on their own, improved the lives of countless farmers and rural communities, and helped feed a growing nation. That was mutual aid on a national level, unachievable by “private enterprise.” It was nevertheless scorned as “socialism” by private-enterprise extremists.
The American political culture might one day get over its obsession with the idea that government cannot do anything right and corporations can do everything better and cheaper, while still extracting a profit. That is when municipalities and states, maybe even the nation, may consider the model for public enterprises exemplified by the public Bank of North Dakota, which has served the public interest and supplied its state with steady revenue since 1919.
The Bank of North Dakota remains the only publicly owned state bank in the nation, despite its success both as a bank and as a source of public revenue, keeping taxes low and funding voter mandated state mandated services. The model of public enterprise, performing a public function, funding government operations, and keeping taxes in check, has failed to materialize beyond North Dakota. That is because of the well-funded corporate propaganda machine, which claims that government can never provide public services as well and as cheaply as can corporations, and, despite the overwhelming evidence to the contrary, has convince the American people that government is inherently inefficient and corrupt.
The Bank of North Dakota has proven the propaganda wrong, as have a few smaller recent state and municipal public enterprises, but the propaganda has won by forcefully persuaded the public otherwise. Today, the privatization of prisons and some other public functions, has further disproven the corporate propaganda. The costs are high and the service is poor. We’ve heard of the horrible conditions in the privatized ICE detention centers. But the propaganda still rules politics.
The Corporatization of Insurance.
For any insured population, insurance premiums added together become a public good, owned collectively by those who contributed to the insurance fund. They are designated to fund payouts to those who suffer the consequences of the risk. (Of course, in the U.S. today, the premiums fund high return investments that provide lavish profits for the private insurance corporations, executive, executive pay in the millions, and return on investment for their shareholders.)
Among the insured, only those who incur a loss—require medical services, for example—are covered by drawing from that pool. Because the American medical insurance ‘system’ is so broken, with insurance companies reaping great returns and able to avoid much of the responsibility for covering claims, that Americans experience poorer health outcomes and shorter life expectancy, and pay much more in premiums than Europeans pay in taxes. That is the primary difference of the U.S. ‘system’ from the “single payer” healthcare systems elsewhere.
The most absurd idea related to insurance was recently offered by the president who would be dictator. He proposed to simply “give” the premium money to the people so that they could, theoretically, pay their own medical expenses. Well, nobody has ever covered their medical expenses with an amount equal to the premium. Some have no medical expenses and others have very large medical expenses, and nobody can predict who will have more or less. That is what mutually covering the cost of risk is all about. That is the essence of insurance.
Why “give the money” for the insurance premium to everyone, when some have no need for medical treatment and others may need to cover a catastrophic event? That completely defeats the idea of insurance itself as a means to reduce risk for participants. But then, if we are serious about insurance, we must ignore such scams. Part of the problem is that extreme American individualism does not get the idea of pooling assets to share risk.
Learning the Obvious: Mutual Risk Mitigation is Simple
The U.S. is the only “advanced” industrial consumer nation in the world that does not have an effective singular public health insurance system. The Affordable Care Act (ACA), so-called “Obama-Care,” is a great compromise between genuine mutual insurance and the private profit interests of Big Insurance. It is a mismatched combination of partial public insurance and private schemes of poor coverage for a higher cost. Many people ‘fall through the cracks.’
The so-called “Advantage” Medicare options are private insurance that appear to cover more but often cover less for a higher price, and fight against paying legitimate claims, while heavily advertising on television. The big insurance companies are still trying to get rid of the public insurance elements in Obama Care,” that is, Medicare for most and Medicaid for low income folks. The more fortunate clients of Medicare can buy private supplement policies to cover some of what Medicare does not cover. At best it is a hodgepodge pieced together by compromise between political interests; it is not designed to directly serve the health interests of the American people.
Of course, other systems are far from perfect. My Canadian friends complain about long waits to get appointments or treatments; same with the British. That is not unheard of in the U.S. either. We also have doctor shortages, influenced by regional economics. However, the source of the higher costs and inferior outcomes is obvious.
The giant private bureaucracies that “manage” claims and payments are extremely expensive to operate and constitute an unnecessary level of ‘administration.’ In most ‘modern’ nations, taxes are collected to pay the costs of the medical system, and patients go to the doctor, medical clinic, or hospital and get the service without all that extra paperwork around qualification for coverage and sorting out which bureaucracy pays what portion. The cost is simply paid out of the national medical care fund.
The bottom line is that Americans pay more for partial healthcare insurance and experience less effective care than in any European country, where typically healthcare insurance is a public enterprise paid for directly by national taxes. Doctors are professionals, not capitalists. Yes, Finnish people pay higher taxes, but they get free higher quality medical care with better outcomes, and vastly less private and public bureaucracy administering a much simpler more efficient system. Their education systems work that way too.
The American obsession with lower taxes would do better to focus on the fact that mega-billionaires and giant corporations escape paying most of the taxes that the rest of us pay. The lower taxation ideology serves the rich, who are able to dodge most income tax via legislation their lobbyists pay for, designed to make much of their huge incomes non-taxable, while the rest of us suffer the consequences in runaway national debt and much higher rates of taxation of our vastly smaller incomes.
The current autocratic attempt by the new American fascists, has so far simply amplified our problems of oligarchy and extreme inequality by further cutting taxes for the super-rich and trying to cover some of the costs by reducing all manner of public benefits of government. They are trying to cut the half-hearted national healthcare system as well as many other public services; they are further taxing the people by imposing extra sales taxes on all imported goods, in the form of tariffs. The need for social, political, and economic transformation could not be greater.
Robert MacNeil Christie, Author 