Would a nationalized insurance company be a good idea?

Great Debates
1

The idea is pretty simple, really. Should the government provide health and auto insurance as a non-profit program? Or, at the very least, should the insurance industry be regulated along the same lines as water, natural gas, waste removal, and electricity companies?

My thoughts are that since obtaining car insurance is required by law in order to live a normal lifestyle, companies shouldn’t be allowed to profit from it, or at the very least, the profits they make should be strictly governed and regulated. I can’t think of another industry that enjoys such a legal mandate, and it pisses me off that the government is telling me I have to buy a particular service, and that service provider is allowed to charge Whatever the Hell He Wants for it.

Home insurance doesn’t have a similar legal mandate, as far as I know, but I think a heavily regulated or nationalized home insurance provider would have a major positive effect on housing and home ownership. I also think that insurance companies providing home insurance enjoy just as much of a windfall from banks demanding their loan recipients use the service as car insurance providers enjoy from the law. It’s only slightly less annoying that it’s the banks and lenders demanding it than my government demanding the same.

I understand that banks should be able to require home insurance before loaning to you. I understand that the government should be able to require drivers to have liability insurance. What I’m not happy about is that these essential insurance services are only available through companies making enormous profit margins with basically no consequences. These guys shouldn’t be able to collect X dollars based on a legal mandate, and provide only X/2 for their services. It would be like the trash company deciding that they’re not making enough money, and charging you 5 bucks per bag to dispose of your trash, in order to make their investors happy and pay the top executives a forty million dollar bonus.

Am I the only person annoyed by this?

2

No.

Companies do not simply charge whatever they want for their services. There are quite a few different car insurance companies. If you don’t like your insurance rate, go to another. Your rates are pretty much determined by the type of coverage you choose and your driving history. If you are paying outrageous rates, it’s probably because you have too much coverage, live in a dangerous area, or are a horrible driver (or a combination of all three).

Why should the taxpayers of the country subsidize your car insurance needs, which is what would happen if the government ran an insurance company? Pay for your own car insurance. Don’t ask taxpayers to do so because you don’t like your rates.

3

Or go without; oh, wait, that is illegal. Not a very free market if I can’t opt not to buy the product entirely.

4

You want the same bureaucracy that is screwing up the Walter Reed VA hospital, or FEMA, to regulate insurance?

I do not. It seems that the government can’t find it’s ass with both hands sometimes.

5

I’m not sure why the government has to run it, as opposed to simply regulate it, but its worth noting that there are many market advantages to having a single or only a few providers of insurance.

Currently, for instance, there are distorted incentives for insurance companies to provide incentives for behavior that reduces costs across the board (spillovers). In the car insurance market, for instance, it’s clear that the wider use of Lo-Jack systems would DRASTICALLY cut down on theft and thus theft claims, benefiting everyone. The problem, however, is that MOST of the theft-preventing benefit from each additional Lo-Jack system goes to cars the company does not insure, so the benefit isn’t taken into account.

There is the same failure in lots of contagious disease cases, which is well noted, but another in preventative medicine which is less well noted. That since people change employment, and this often changes their provider, insurance companies see far less of the benefit from preventative care than they otherwise would. And so its drastically undervalued… increasing the cost of the health problems that ALL insurance companies have to pay out for.

6

I dunno: the taxpayers in their infinite wisdom have, in many states, decided to force everyone to buy insurance. Arguably that’s a heck of a lot more outrageous from a libertarian perspective than merely taking tax money in general. If my neighbors think that it’s my obligation to own insurance, then I sort of thing that making them pay for at least part of it is only fair.

7

I’m not asking the taxpayers to subsidize my insurance needs. I’m asking for a more heavily regulated or nationalized insurance provider that doesn’t turn my legally mandated premiums into a profit.

And what exactly are all of the insurance buyers doing, when your house burns to the ground, if not “subsidizing your home relocation needs”. Insurance itself is a socialist invention, so it doesn’t make any sense to throw the anti socialist rhetoric about taxpayer subsidies back at me.

8

Sure you can. Don’t drive a car. Lots of people don’t, and they don’t have to buy car insurance. This is kind of like complaining that the gasoline market isn’t a free market, because I can’t opt to not buy it, and still drive my car.

9

Not exactly the same, because purchasing gasoline isn’t mandated by the government in order for you to drive your car.

Also, my argument was that insurance is a commodity just like waste removal or electricity, and should be regulated and treated as such.

10

Bio-diesel and electric cars. 'Nuff said.

11

Aren’t you still supposed to pay road tax on those?

12

So your basic problem is, people are making a profit? And no, insurance is not a socialist invention, unless you define any collaborative system, whether it existed prior to the origination of the term “socialist” or not, to be a socialist invention. Personally I don’t buy into that, I view socialism as a clearly defined ideology that h as only really been around a few hundreds years at most and whose primary ideological founders have only been dead a little over 100 years–anything invented before that, to me, can’t be a socialist invention.

Insurance is just a way to distribute risk, and distributing risk by pooling resources is something that exists very much in capitalism, and that is in fact one of the driving concepts behind formation of the earliest corporations.

Part of your beef seems to be that car insurance is “mandated” by the government. But that isn’t the entirety of your beef, as you feel home owner’s insurance is pretty much the same, because it is mandated by banks.

Realistically, I don’t see why if you’re willing to take that step, you aren’t willing to take other steps as well. Electric power and water/sewage services aren’t necessarily “mandated” by they are required to live a modern lifestyle. You don’t have to pay an electric bill but nor do you have to pay a car insurance bill. Electric companies are government-granted monopolies in most areas, and energy companies make huge profits just like insurance companies do.

Trying to distinguish between “government mandated” and “mandated by the realities of life” to me, isn’t really a meaningful way to distinguish things. Because you only need a car if you “need” to be able to move around freely over large distances in a private conveyance. You don’t have to have a car, live in the suburbs, or even have electricity in your home.

You pretty much do have to have food though, and several grocers and big chains that sell food (Kroger, Wal-Mart, K-Mart) make enormous profits. Buying groceries isn’t government mandated, but it’s definitely mandated in a more serious way than car insurance or even electricity is, it’s absolutely necessary for survival and a great many people would be unable to realistically feed themselves if they didn’t buy their food at stores, paying corporations with multi-billion dollar annual net income in the process.

Maybe insurance does need regulation, but just because it is “government mandated” to me, doesn’t instantly mean it needs more or less regulation. It’s only mandated in that, if you want a car you have to buy car insurance.

13

If insurance is supposed to be a way to distribute financial risk by pooling resources, I think it’s wrong for the person collecting the pool to take half (or whatever the percentage is) before redistributing it.

That’s my beef. Maybe comparing it to energy companies is wrong, because energy companies are actually selling a finite amount of product that is subject to the market laws of supply and demand. Insurance is related more to other public services like trash collecting and the postal service than it is to energy production. Even more than that, it’s related to government social programs like social security, which was basically just another way to create a collective risk-distribution process.

I think that insurance should be available through a strictly regulated and governed agency (or company) that distributes our pooled resources without investors and executives pressuring to deny claims and raise rates. Insurance is NOT a market commodity, and shouldn’t be treated as such.

14

I am as much for reforming healthcare in this country as anyone, but we have to do it in a way that doesn’t overy harm the insurance companies. Everyone who talks about getting rid of them or nationalizing them acts like the insurance companies are these vast beaurocratic monsters who just hoard money. I will grant that they do probably add some to the cost of healthcare, but they also provide tons of jobs and generally add alot to the economy. Hell, the economy of the region that I live in revolves around companies like Aetna, Travelers, Cigna, MassMutual, and the Hartford. The average insurance industry employee takes home more than $100k/year. All kinds of other high paying jobs in companies like law firms, software companies, etc. depend on the business that the insurance companies provide. If you took those away, the region’s economy would literally crash overnight. On a larger scale, anyone who has owned Aetna stock for the last 3-4 years has made alot of money off the insurance industry. So while, by all means, yes, reform healthcare, it has to been done in a way that is realistic or we risk destroying alot of people’s financial well-being

15

The benefits do not justify the expense. Insurance companies are an unnecessary filter between doctor and patient that add nothing to improve health care, and arguably cause the increase in medical services. Sorry, just because leeches have families is no reason to maintain their hold on the body of the nation’s healthcare system.

16

Pressure to deny claims is a good thing. Every insurer, whether private or government run, faces large numbers of fraudulent and dubious claims. An insurer that develops a reputation for unquestioning acceptance will face a torrent of such claims, leading costs to skyrocket and insurance to become unaffordable for everybody.

Of course, valid claims shouldn’t be denied. The recourses against insurers doing so are, (1) insurance is a contract, and an insurer who fails to live up to the terms of the contract can be taken to court like any other business entity; and (2) insurers that develop a reputation for contentious handling of valid claims don’t get much repeat business.

17

I’ll grant some of what you say. But several successful nationalized systems, Israel’s comes to mind, incorporate private insurance companies. I maintain, given the entrenched nature of private insurance companies and thier role in the economy, that any successful attempt to reform healthcare will have to incorporate them. Its great to rail against them and call them leaches, but realisticly, any reform which proposes destroying multi billion dollar companies and collapsing regional economies has less than a snowball’s chance in hell of ever coming to fruition. The window for that kind of system closed 50 years ago. The cat isn’t going back in the bag. Whatever the successfult solution is, it will have to recognize that the private insurance companies aren’t going anywhere.

18

No, the government has said that anyone who uses government roads must have insurance. You can drive a car all you want on your own land without insurance. The government has the right to set rules on its property. Making sure that you can pay for any damages caused by your driving negligence seems like a pretty good rule to me, even with my libertarian instincts.

No, you are asking taxpayers to subsidize your insurance. You don’t like the high prices you are paying and you think that the government-run insurance company can provide such rates at a lower price. The only way they can do that is if they subsidize it. You really think insurance company profits drive up the price of insurance by a huge amount? If so, please provide a cite that shows how much insurance company profits increase insurance amounts. I would truly be interested in seeing this.

Why? They are providing a service. Why shouldn’t they be able to be compensated for that service?

19

This sort of argument makes no sense at all. You are essentially arguing that we should do something economically wasteful so that we continue to have jobs… forgetting entirely that if the waste was eliminated and the money spent on something else, a different sector of the economy would grow: and grow MORE than what was lost from the insurance sector. In other words, to the degree that insurance is an economically wasteful industry, the jobs you are talking about come at the opportunity cost of MORE jobs for other people elsewhere.

20

Social Security is also a service that pools resources to distribute financial risk. Do you think a couple of private corporations ought to be able to manage Social Security funds, and take a cut off the top?