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This scenario would be better posed to a 5th grade class...
That's funny... Because you're probably right. 5th graders can easily comprehend the issue. And, you can teach them the fundamentals of how to use money.
Let's explore this for a moment: Let's assume for now, that your tires are purchased by an insurer for you.
What's the penalty if you drive with them low and blow them out? Who will decide which tires you get? It won't be you.
Now, lets imagine for a moment, that the insurers and tire dealers get together at first and the insurers say "we want 20% off list for the privilege of having our customers buy your tires". Now, there's some rich folks who don't really care, and buy the fancy tires they want, but everyone else buys tires via insurance. So, unless you want a really small market, you have to take it.
So, after agreeing to wipe out 150% of your profit margin in order to stay in business, what's your next move? Well, the tires may have to be sold at a loss. But not installing them. So, instead of 14 bucks a tire, the tire shop now charges 37 dollars a tire to install them. And 11 dollars to balance. And 8 dollars to leak check. And 6 dollars to test the TPMS system, and a "disposal fee" which the owner has to pay of 9 bucks per tire.
So, instead of selling you a tire for 127, and 14 to install ( 141 a tire) - the tire store now gets 102 for the tire, 37 labor, 11 balance, 8 testing, and 6 tpms test ($173).
No FREAKING WAY would you, the consumer, ever pay those prices.
But insurance will. It just passes the costs on to you in the form of monthly premiums and you get your tires for free and have to pay the $9 disposal fee, right?
No, you NOW pay $173 / tire + cost for the insurance and tire dealer to administer the paperwork + 9 disposal fee per tire. It's just hidden from you.
I have. They still had gold and silver certificates around when I was a kid.
I guess i buy that..... But then you are dating yourself
I think you may be in error on the gold, unless you are a lot older than I think. It is possible but then I am not sure i ever knew of anyone that old on line. At least you know what I am talking about and you came from a different America like i did. I do appreciate being backed up. It's almost like trying to explain what a party line was, or no tv at all. These youngers have no idea what real money was.
Every so often I ask what a dollar is worth and so far no one has even tried to say..... Do you recall a gallon of gasoline at 25 cents?
If we had real money, today a gallon of gas would be about 20 cents! All this says is the dollar is subsidized and is almost worthless. The last time I ran the math these notes of today were worth around 2 cents silver.
The above scenario is what has happened to "health care insurance".
Insurance is really an "after the fact risk sharing scheme". You contract with them for certain risks YOU are unwilling to bear yourself. Or, your bank (like house insurance or your car insurance if you have a loan on either) is unwilling to bear.
Insurers use the best information they have to determine what they believe the ultimate risk is for the specific risk or event(s), how that translates into cost for payouts, and then charge that much... Plus a profit margin.
Oh, and don't call them "greedy". BY LAW insurers must prove they will have adequate profits AND cash on hand to pay out estimated risks. IF those estimates are too low, the people who run the company can be prosecuted for violating law. Their actuaries must use data that reflects the best known, and they must demonstrate that their method of analysis has credibility. Or, again, they're in violation of law.
This is why insurance rates can be predicted. There are actuaries everywhere, and the data they use is often easily available (often not cheaply, though). The analysis is pretty much standardized statistical work.
So, for every risk you hire them to carry for you, the price must go up.
So, the secret to using insurance, is to carry as much risk as you can on your own.
America's personal money management preacher of late is Dave Ramsey. Ramsey will tell you, that if YOU are paying for it, then buy as little insurance as you can get away with. Especially don't pre-purchase services through it that you could shop for yourself. Like buying tires through insurance, it will easily cost 10, 20, 50, 100, or even 2000% more than just buying it yourself for cash.
So why does the government require you to buy insurance with a HUGE array of pre-paid services?
Because those are the most profitable for both providers and insurers. And because the majority of health insurance is bought by someone other than the patient, who never sees EITHER bill. They just consume it like it's free.
THIS is why the cost of health care services has spiraled wildly out of control. People who do not save a dime of their income, who live from paycheck to paycheck, expect to be able to use 50, 100, or even 500 hundred thousand dollar's worth of health care miracles as a matter of "right". And the only way that happens, is that premiums go higher and higher.
You can't solve this by having the government do it. Government procurement IS EVEN LESS EFFICIENT than insurance. Medicare sought to "solve" this by simply refusing to pay anything. It has lead to shortages of Medicare accepting doctors.
Push everyone into a "price controlled" system, and EVERYTHING will become in short supply.
None of this has anything to do with profits. The most efficient companies and providers make good profits, yet provide goods and services at competitive prices. "Non-profit" operates by assuming that all revenue can AND MUST BE spent, whether any need exists or not. Only when someone balances need and return on investment in a rational manner, does the interests of the consumer get met.
IT should be done by the consumer. Politicians can't. Government regulators are worse at it than monkeys jumping on calculators at predicting what the needs will be, and often fail completely at deciding what to do to meed PRESENT needs, much less plan for the future.
You are really talking about Medicare, Tricare, VA and some of the better private and government plans. The ACA has only a partial resemblance to those plans. Tell me if you are now on Tricare would you jump at the chance to go to the Bronze level of Tricare?? By the way Tricare and VA aren't all that small with 16.5 million enrolled. What I don't understand is why it seems like so many who are on Medicare and Tricare-VA are so opposed to the people who are paying for your benefits getting a break? Can you explain that especially if you are on VA? I guess working class people don't deserve a break even though they are footing the bill for Defense, VA, Tricare, and VA and what ever else the Republicans love.
You are really talking about Medicare, Tricare, VA and some of the better private and government plans. The ACA has only a partial resemblance to those plans. Tell me if you are now on Tricare would you jump at the chance to go to the Bronze level of Tricare?? By the way Tricare and VA aren't all that small with 16.5 million enrolled. What I don't understand is why it seems like so many who are on Medicare and Tricare-VA are so opposed to the people who are paying for your benefits getting a break? Can you explain that especially if you are on VA? I guess working class people don't deserve a break even though they are footing the bill for Defense, VA, Tricare, and VA and what ever else the Republicans love.
YOU need to get on topic.
The TOPIC is all about insurance and why misusing "insurance" as a means of purchasing is financially absurd.
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