Insurance was invented to be and is conceptually perfectly suited to be an aspect of finances used to manage risks which you undertake voluntarily. This is because, as fitting from its creation, it was devised to reduce the risks of loss and ruin for losses during shipping, literally.
So whatever you do voluntarily that incurs risk of loss you can reasonably, if you can determine the relative value of what may be lost and get your bean counters to give a good estimate of what the odds are of loss, and of course assuming you can find an insurer, buy insurance.
Insurance is a form of gambling except it is not gambling where you are seeking to win but gambling where you are seeking to limit your losses on the chance that you will lose badly. Your insurer is basically your bookie. If he knows his stuff he will have the skills to know what are the real risks involved are and he will know how to skew things in his favor so that at the end of the day, say when heās selling insurance to a whole mess of people, he will come out ahead and have some take home to feed his family and pay his staff.
That of course is the simple version but it captures the essence of what insurance is fit to be.
Now, when a person looks at insurance as an aspect of finances and commerce it is easier to not āabuse insuranceā because itās easier to get emotionally detached and say in essence the Lord has given and the Lord has taken away, blessed be the name of the Lord.
By this I mean that you may have an easier time resisting the urge to try to use insurance for not losing at all rather than just making losing a bit less sucky and ruinous.
But what happens if you want to buy more insurance to cover more downsides of life? Well, the insurer still knows the odds, likely better than you do, but as he agrees to take on more and more of your risks the odds of him having to payout actually compound if heās being responsible to his own bottom line. That means even though it may seem like youāre just two or three times more likely to have a claim he should be charging you even more.
Now, insurers are perfectly willing to sell people as much insurance as they will buy because, like bookies, they know the odds and how the game works. They generally make more money when you carry more insurance you donāt need right up until the point that you are buying so much insurance from them that youāre basically trying to eliminate risks entirely and a claim is not just a possibility but an inevitability, even a certainty.
This is what I meant by using insurance as assurance.
And youāre gonna pay dearly for it too.
(I will not address what insurers have learned to do in the meanwhile with those big piles of money, how they invest it to get short term gains to pad their bottom line even more ā¦ and other stuff like that there.)
So when I speak of people abusing health insurance we need to clarify some things:
ā¦ heath insurance involves the sort of stuff that Satan thought he could get Job to curse the Lord over, our skin and bones, so detachment is a bit harder to come by;
ā¦ it can be so bad that sentimentality over hard cases, often just asserted hard cases, can easily run amuck and you get folks running around screaming there oughta be some law (as Obamaharm is an extreme example of this stuck on stupid, but so would ANY replacement for it that didnāt focus on taking steps to undo some of what the States have done to socialize through insurance pools or to separate insurance as a benefit of employment) to take care of those hard cases;
ā¦ this last results principally in the States using their regulatory powers to force people to try to carry insurance (nominally when they buy it) for things that theyāre not really at risk of (rare diseases being one example).
But before all of that there was something FDR and his Congress lawlessly did that really made the current problems inevitable and that was to (unintended consequence) tie health insurance to employment as a benefit. This helped to hide the costs of buying insurance from the insured, true, but as a benefit, and as a matter of health, it eventually led to people depending on insurance to pay their bills that they would eventually incur because getting sick and dying is just a part of life no different than having kids is ā¦ ah, but now you can imagine that you can do all that and it not cost you so much (lots of coverage for everything under the sun and low, low co-pays)!
Except it is. A lot really and itās only a matter of time.
The thing about this is, like many sorts of abuses, itās something you can only get away with for a while. Eventually even if insurers and hospitals never got greedy (a big if) your insurers will face a time when the likelihood of a steady stream significant claims would demand they start charging ever higher premiums. At this point everyone would start paying more. That hospitals etc are greedy only makes the cycle worse.