It is common today to hear people complain about high insurance premiums for all types of insurance including health, auto and homeowners. Companies are said to be greedy because they want to make a profit and all that. So why not revolt? Why not start your own “insurance company” that you and your family and friends can use to avoid all of this nonsense?

Imagine some early-twenty-somethings just starting out on their own and entering the work force. They looked at buying health insurance because their employers do not give it, or maybe they are self-employed. Greedy insurance companies charge too much so what they decide to do is start their own pool among themselves. They figure since they are each young, healthy, and not likely in need of too much medical care, they decide that $50.00 a month per person is what the contribution should be. They decide to spread the risk among the group and agree that if anyone does need to go to the doctor, they will pay the bill from the pool of money.

There are five in the group to begin with and each is healthy and willing to participate. After only a year of staying healthy, as these young people are better able to do, they amass $3000.00 for the pool. As it happens, these people are all health conscious, they stay in shape, eat right and try to take care of themselves. As time goes on, some other friends of similar age and health join into the plan and even after a couple of doctor visits for some of the members, in a couple of years they find themselves with $15,000.00 in the account.

An onlooker comments that $15,000 is not that much money at all if some major illness or injury should arise. The members of this group point out that you could still go and get extra insurance elsewhere — or not participate at all if you desire. In addition, they are very careful as to who they allow into the plan.

A 65 year old heart patient who is on medication and who also smokes wants to get into the plan because his insurance is much more than $50.00 a month. He would like to save some money yet get the same coverage he needs. The other members realize that an older, less healthy person such as this would quickly deplete the funds and ruin things for everybody. The 65 year old cries that it is not “fair” and he hires a lawyer to sue for discrimination.

The next day, a cancer patient going through chemotherapy asks to join because he cannot afford to pay for his treatments. He is denied entry into the plan because the members know that such expensive treatments will exhaust the funds so that none of the other members will have money available if they need it. The cancer patient sues because he is being refused insurance due to a pre-existing condition.

Another young healthy person wishes to join the plan. His issue is that he cannot afford to pay the $50.00 per month because he is unemployed yet he still wants to have medical insurance just in case. He is denied entry also because the members all agree that the purpose of starting this pool was to share the risk among the members. Sharing the risk requires sharing the expenses. This rejected applicant says that he will also sue and is now looking for a lawyer that he can get for free.

A judge rules that this insurance pool is acting illegally. He orders that you cannot refuse entry into the plan due to lifestyle choices such as smoking, you cannot penalize someone because they have a pre-existing medical condition, and that it is cruel and greedy to deny someone coverage just because they cannot afford to pay for it.

All of the rejected applicants are now entitled to be a part of the plan. The original members now realize that $50.00 a month is nowhere near enough to pay for the medical care of the new members. They look at the recent health bills from the new members and realize that they must raise everybody’s rates to $5,000.00 per month. This is the estimate based on 1)the new court-ordered medical expenses that must be provided, 2) the fact that some members will be paying nothing into the plan, 3) the lawyer that needed to be hired to defend litigation, 4)the accountant that needed to be hired to keep track of everything and 5) someone to run the whole once-simple operation.

Some of the healthier original members who remember paying $50.00 per month do not think they are getting a good deal so they drop out – increasing premiums even more. It would be “unfair” and “discrimination” to charge different people different rates. Other members complain that $5,000 per month is too much and that the salaries of the greedy employees must be lowered — or that they should be working for free!

Another judge rules that $5,000 per month is “unreasonable” and with the bang of a gavel, disregards the estimated costs that were calculated by the actuaries of this group. Due to the court order and the public outcry of “price gouging”, they may only charge $100.00 per month – unless you can’t afford that much. Within the first month, the plan goes bankrupt and now no one gets any medical care from the plan.

The original member of this plan now shakes his head in disbelief as he sees how far things have spun out of control. Legal requirements of “fairness” along with the perception that he was running some sort of charity both killed his once good and successful idea. Those that could originally pay for their own medical insurance were driven out by the expense of being forced to pay not only for themselves, but also for the expenses of others. People who thought that they were entitled to have someone else pay for them became victorious and the once-great pool of money has disappeared all because people believed that they had the “right” to medical care either for free — or for a price that only they thought to be fair.