Is insurance really a good thing?

Nearly everyone has insurance of some type, and most have several: car insurance, life insurance and medical insurance. But is the basic concept of insurance, paying insurance premiums and subsequently filing claims, really the best way to pay for unplanned expenses?

Let's look at the benefits and the effects:

Insurance is good because it allows us to better buget our money, and provides a safety net in case a crisis arrises. But let's look beyond the known benefits and get to the actual societal effect.

Most people agree that prices consumers pay for goods and services should be set by free market forces, such as supply and demand, cost of living and simple competition. But when you put the insurance company between you and the doctor, as in health insurance, then basic market forces are all but lost because the insurance company -- and not you -- writes the checks to pay the bills, which frees the health care industry to increase prices to levels far above what consumers can normally afford.

For this reason, I am beginning to wonder if todays insurance models don't add up to social corruption.

Before the insurance model existed...

It used to be simple. Industries mostly didn't gouge their customers because they'd have priced themselves right out of business. People generally paid cash as they went. The breaking point on prices was relatively far lower because the deep pockets people went after when they were injured by medical malpractice or in a car crash were simply not present.

The insurance model is socially corrupt because facilitates gouging.

Employer-provided health insurance...

My electronics instructor had a saying which applied closely in electronic circuits: You can't get something from nothing. You can increase the voltage, but at the expense of amperage. This applies in life as well. When an entire society demands that employers provide health care to employees, there is a feeling that we're getting something for nothing.

I guarantee someone is paying, and it's probably you.

Perhaps the company you work for is passing some of the health care cost on to consumers of its goods and services, but my sense is that the lion's share of the health cost comes in the form of limits on wages and other benefits. And that has a dramatic effect on standards of living.

The pie is only so big, right? The smart people will figure out how to get larger and larger pieces of that pie. The really smart people will get laws passed that will guarantee them a piece of the pie.

The Peer-pressure Model

Employer-provided health care causes a social phenomenon not seen before. Because we don't pay our own bills in a 'pay-as-you-go' system, fat people, smokers and people who have a lot of kids are scoffed by their co-workers. Why? Cost sharing. It's an easy relationship to draw; the more babies YOU make, the more MY health care costs.

I don't think it's fair, but I don't blame co-workers who choose an unhealthy lifestyle for themselves. (Let he who is without sin cast the first stone.) No, I attribute the problem to socially inept leadership; politicians and industry lobbies, for instance, who permit this kind of model to exist in the first place.

Yes, you might think you live in a country that has a free market system, but someone doesn't want you, the consumer, to have any impact on health care costs.