PHI 101: Why Private Health Insurance Doesn’t Meet Our Needs

Private Health Insurance Companies:

• Only want to cover the healthy and divide the population into small groups, driving up costs

• Do not want to cover costly services

• Cover different services under varying conditions and pay different amounts

• Can change many terms of coverage whenever they please

The insurance industry has been able to break up the population it covers into thousands of different categories—male smoker, 60-year old waitress, chemical worker, Montana logger, Florida drinker, cancer survivor, you name it. And, it can charge different amounts for each different group and for all the costs associated with fragmenting the population and pitting men against women, Californians against Iowans, rural farmers against urban businesspeople.

While insurers must treat all employees of a company equally in terms of what they cover and what they charge, they are allowed to treat everyone else differently. They do everything in their power to avoid having to cover people with costly conditions because they want to avoid risk. But taking on the risk of a group is the reason insurance was created.

Insurers end up making health care very expensive for people who need care; we all end up at risk since none of us knows when and if we will need costly care. If we spread risk across a large swath of the population, as Medicare does, we would all have the security of knowing that if we needed costly health care, it would be available and affordable.

But, in most states, insurers have the power to set their rates and the terms of their coverage; and they are making good profits. That's why they like the system the way it is.