Can someone please explain to me the purpose of an insurance company when participation in the pool is mandatory? A policy like this seems like it creates a legislated middle-man that just wastes money.
Participation in the automobile risk pool is mandatory in all 50 states, even in states with no-fault accident laws. Nobody questions whether auto insurance companies are really insurers. Similarly, while huge companies aren't required to insure their commercial activities, virtually all of them do.
Mandatory coverage is orthogonal to the question of whether health insurance is a proper insurance scheme, or some kind of social safety net entitlement, or a utility. The sole purpose of the mandate is to make free-riding on the insurance market unlawful; it's a mitigation for an asymmetric information problem.
Oh, so you mean, "only if you don't live and work in one of a prohibitively small number of major metro areas in the US".
For all intents and purposes, auto insurance is effectively mandatory for most Americans. It's for a similar reason that many states revoke driving privileges for parents who don't comply with child support.
You have to own a car, though. The state makes you buy car insurance because you can do a lot of damage to other people and their property with a car. They own the roads, so they're responsible for making sure you can pay for that damage.
Texas, for instance, doesn't actually make you buy insurance. You only have to prove that you can be financially responsible for the damage you could cause [1].
Why is this relevant? You made the claim that "The sole purpose of the mandate is to make free-riding on the insurance market unlawful"
The medically uninsured only pose a financial threat to themselves. It's only through laws that make taxpayers responsible for the medical costs of the uninsured that they pose a threat to the rest of us. This mandate won't change anything in that respect. It will just make the line from taxpayer money to person who can't pay for his medical bills harder to follow.
The laws making the rest of us responsible for the uninsured aren't really optional, so it's probably better to just reason about this problem as if the uninsured were just intrinsically a financial risk to us.
Some kind of organization is going to perform the task of paying money for medical bills: figuring out which medical bills to pay and trying to get lower prices. It can be part of the state or it can a separate corporation; both kinds have historically shown the capacity to waste money.
"Middle man" isn't a dirty word. The health care deals you get in the US are much better with the middle man than without the middle man. Since the insurance companies have so much power, they can (and do) negotiate better rates with health care providers. The cost of paying for your own health care is shockingly high by comparison to the rates the insurance companies would pay on your behalf.
Theoretically, it could produce competition between the insurance companies. Sure, you have to buy insurance from someone, but do you want to buy it from the company which has more doctors close to where you live, or the one which pays for PSA blood tests? Maybe one company only pays for you to visit your GP when you're sick, while another decides that they can save money by encouraging you to get regular checkups and catch problems before they become more serious.
I don't know if this sort of story actually plays out -- I live in a country where the only way to get better health care is to move to a different province -- but it doesn't seem completely implausible.
I believe the theory goes that the administration expenses incurred by the operation of managing healthcare would be incurred either way, i.e. if the insurance companies were not managing distribution of healthcare the government would have to. Given that, allowing the private sector to compete allows capitalist dynamics to drive down the cost.
While both government and private companies are both theoretically incented to drive down costs, practically there is a lot more scope for government to operate the plans in an inefficient way without consequence; on the other hand private companies are primarily incentivised by profit, which does not always correlate with the most efficient way of delivering healthcare.
This is where the nuance kicks in (i.e. big government or small government); a well run government plan would better but leaning on the private sector is a hedge against poor management.
That's exactly what it creates. The obvious strategy here is, "baby steps". The insurance lobby is ferociously powerful. They only accepted the PPACA (with many provisions which hurt their profits) because of the quid-pro-quo with the mandate.
The provision of the law which stipulates companies must spend 80-85% of premium revenues on healthcare expenses are an obvious giveaway: "you're allowed to make only this much money".
The next steps, after this is settled law (i.e., Republicans stop trying to repeal it), are to narrow those margins, then introduce a national healthcare system for everyone which these insurers must compete with.
It makes even more sense than a single-payer system (which eschews the benefits of competition), but you can bet there will be continuing political drama over healthcare for the foreseeable future...
You're subsidizing risk across a large group of people. The chances of something happen to an individual are small, but could be financially devastating. So everyone pools their risk together for affordable premiums.
Not sure if you are joking. Having everyone inside the pool makes up for members with chronical illnesses and other illnesses that need a lot of care. Some still healthy young poeple pay maybe a little bit more but everyone can be treated reasonably well. If you run an insurance without mandatory participation people with problematic illnesses are a risky for the business and that is one reason why the op can't get an insurance in the USA.
I think the point retillit is trying to make is, why even bother with private insurance companies if insurance is compulsory? Which is a good question.
The answer, I think, is partially politics, but also partly whether you think the competition a system like this (in theory) encourages outweighs the cost of profits.
Mandatory participation (of insurance clients) is the necessary other side of mandatory acceptance (of clients by insurance companies).
For health insurance to work as insurance you need the young and healthy to participate and pay more than they'll ever get out of the system, otherwise it's impossible to cover the costs for the old and chronically ill.
