Not Every Health Condition Is Insurable

6620David Howden writes in today’s Mises Daily:

The Austrian economist Ludwig von Mises helped clarify what types of events are open to insurance when he defined two types of probability. Case probabilities are those events for which we know some of the factors that will determine an outcome, but for which there are other factors we know absolutely nothing about. Football matches fall into this category, as do wars. Class probabilities are those events that we know or assume to know everything about a broadly similar category of events, but with regards to any individual occurrence within the category, we know nothing.

Offering insurance without reference to the specific insurable class, or by purposefully grouping uninsurable risks with an insurable class, removes any economic rationale in determining the appropriate insurance coverage and rates. If you think healthcare pricing seems nonsensical now, just wait until you see what happens when mandated coverage removes any semblance of rational insurance pricing to the healthcare “ insurance” market.

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