Health care is back in Congress, and one of the key questions under discussion is pre-existing conditions. You know, those pesky little things. Like cancer. Diabetes. Arthritis. Alzheimer’s. Heart disease. Epilepsy. And a whole bunch of other diseases that will kill you, maim you, destroy you financially, or all of the above without medical coverage. On the other side, we have insurance companies and their lobbyists, who tell us that “pre-existing conditions are just TOO EXPENSIVE!” and “we shouldn’t have to cover things you had BEFORE you went on insurance!”

The arguments by insurance companies might sound just a little bit compelling to those who have never known anyone with these conditions, especially if you aren’t particularly compassionate. But they aren’t compelling at all. In fact, they are bold faced lies intended to make more profits for insurance companies, at the expense of sick people and their families. Please note here that for profit insurance companies have no compassion. They just have the bottom line, which feeds executive salaries and investors. And without them, what would we have? (cheaper health coverage actually, but that’s another blog all by itself!)

So what’s the real story? To understand that, you have to actually think about what it means to be “insured.” You see for health insurance, when we buy a policy, it includes EVERYTHING that could possibly happen to us, with statistical analysis done by actuaries to determine the likelihood that it will happen to you in your lifetime. You are then combined with everyone else in the risk pool (the bigger the risk pool, the better for insurance companies and consumers), and the cost of insuring an average person is the net result. This is very simplified, but it does the descriptive job. Basically the risk of anything happening to anyone being insured by that company is put together to get the cost of insuring the average person.

How does this break down? Males between the ages of 5-40 are a great risk pool. They are healthy, young, and most at risk from external physical dangers (car accidents, etc.) Ditto females, except that pregnancy is expensive. The very young are more expensive, and as you get older costs are likely to increase. As another example, each year in the US about 1.7m cases of cancer of various types are diagnosed — so there is a risk factor for YOU (female, age 26, white, lives in a city, etc. etc.) to get cancer. And if you do, you cost a lot of money. But if you don’t, and you don’t get pregnant, you cost practically nothing. Take all of the “you” people out there and average them out for every disease.

That’s how actuarial science works. Which brings us back to the point — pre-existing conditions. You might say: “but if my relative already had cancer, shouldn’t they pay more?” The logical answer in actuarial terms is “no, they shouldn’t.” BECAUSE THEIR CANCER WAS ALREADY TAKEN INTO ACCOUNT IN THE RISK POOL!!!!! Please note that YOU don’t pay LESS because you are healthy, and more when you get sick. We have insurance to balance out those costs over our average lifetimes, along with everyone else in the risk pool. If it was just you, it wouldn’t be insurance, you’d just pay full price whenever you got sick. And if you had to pay more when sick, you should pay nothing when healthy. But that’s not the way insurance works.

So when insurance companies tell us “pre-existing conditions cost us more, so they should pay more,” this is complete B.S. Unless they screwed up the actuarial math, the insurance companies already took into account the likelihood of someone they insure having cancer in their risk pool. And adding one more person with cancer does effectively ZERO to their bottom line.

Oh, one more thing too. It’s called “reinsurance.” Which is what every insurance company buys from another insurance company to cover costs over a certain amount. Insurance companies buy reinsurance to cover high risk/cost patients, so they only pay a certain amount out (usually in the 1000’s) and then reinsurance kicks in to cover the rest. So if it’s really expensive, they just pass it off to their reinsurance company anyway! And the cost of reinsurance is included in everyone’s premiums.

So when you hear the debate about pre-existing conditions, please remember that it is not a debate about what should be covered. In our current political discussions, the term is really just code for “hey, we can make more profit here because people won’t understand what we are doing!”