Health Insurance Myths

The objective of this paper is to use economic principles and lessons to look closely at the myths that are causing issues for progression in the health insurance industry. Research will be used to debunk the myths and look closely at problems with policy that have caused the myths to form about how health care is managed and how insurance policies have become the way they are. Insurance is a system where it is able to pool risks for people. Almost all people pay a premium to have health insurance. This premium goes into a pool and those who are sick get to be paid out by that pool that is everyone’s premium payment. The expected cost of treatment for everyone in the pool is the cost of the premium. The reason this insurance is set up like …show more content…
Insurance protects us against the mystery of uncertainty. We do not need insurance for college tuition because college tuition does not hold the same uncertainty as becoming severely sick does. If you become severely sick, you will most likely be paying even more than the basic college tuition amount for your health care. This leads into the problem of adverse selection in health care. Adverse selection is defined as when a good or service is wanted by a certain group of people who also happen to offer the worst return for the company. Adverse selection can tie into health care because insurance companies do not want to insure risky people, such as people who don’t exercise, smoke, eat well, and have routine checkups. These types of people need more health care than regular healthy people; therefore they need to be taking out insurance because they are more likely to have health problems unlike healthy people who don’t engage in behaviors that could harm …show more content…
Insured sick people and uninsured sick people show to different problems for public policy. If someone who is insured gets sick, the insurance company is obviously not happy about this because don’t want this small illness at the time to become a chronic illness, therefore it has been encouraged by the health insurance companies to let go of their sickest enrollees. Also enrollees run the risk of having to pay more for their premiums in the later years because they became sick. This shows there is limited long-term health insurance because insurance companies are trying to “give you the boot” by raising your premiums or just dropping you as a customer because you are too sick to pay for. Uninsured sick people have a different problem because they need health care. They need to be cured, not insured. The problem with low-income uninsured sick people is that there is uncertainty of how to provide these people with the appropriate level of care, along with how to encourage more people to have health insurance so they are not in this situation. The main difference between health insurance and health care is that health insurance lowers cost of getting health