I couldn’t have designed a better case study for the polar ideals of American legislation if I tried! Don’t get me wrong–it sucks to have anyone’s house burn down, but I absolutely love this as a case study.

First, it’s amazing what stance people take when legislation is not directly labeled with a political party. If you peruse the forums discussing this incident you’ll find people affiliated with a particular party arguing for an ideal that’s completely opposite that party’s ideals. I love when people start to think on their own!

Second, it’s such a simple, stark contrast between raw emotion and economic reality.

Raw emotion: You’ve got to help the guy out! It’s not humane to let the man’s house burn down over $75! What kind of a messed up mayor or firefighter could stand around and watch this happen! This is the reaction that most people have expressed. When viewing a single incident with such strong, emotional ties, it’s also the easiest reaction to have and the hardest to reason against without feeling/appearing evil.

Economic reality: The fire department is not a charity. It has bills to pay. If the fire department puts out the fire without a penalty, why would anyone else ever pay $75 when they know they have fire protection regardless? If nobody pays the $75, there’s no fire department.

So, what’s more messed up? Having a man’s house burn down because he didn’t pay the $75 or not having a fire department at all because nobody pays $75?

This is a classic demonstration of a pre-existing condition. I recently wrote about these concepts in my Insurance and Pre-existing Conditions post, but I can’t help but re-iterate: accepting and supporting pre-existing conditions works for charities, not businesses. Fire departments and insurance companies are businesses regardless of the tragedies they deal with. If they don’t pay their bills, they no longer exist.

The main purpose of this post is to get people thinking regardless of my stance on the issue. Even so, I do think there’s room for middle ground in this particular case. In reality I would have put the fire out anyway and levied a fine high enough to encourage other homeowners to continue to pay the $75. What would you have done and why? Also, how do you feel about a-la-carte government (e.g., pay for fire protection only if you want it)? I’d love to hear what you have to say.

That’s right! I’m worth it! I’m worth L’Oréal beauty product and nobody can take that away from me. What else must I need for convincing? Why buy anything else? I’m going bold with L’Oréal and never coming back because I’m worth it.

But that’s not all. This morning my TV once again reminded me I’m worth it. CNN, America’s most trusted news source, interviewed a man in his 50s-ish who decided he was healthy enough to play the odds without health insurance. That’s not just my assessment; he literally acknowledged he was playing the odds. Good for him. Soon enough, he found out he had a cancerous growth in his neck and the operations to remove it would cost hundreds of thousands of dollars. Fortunately for him, he found a charitable organization that allowed him to get the operations he needed to remove the cancer. In the end, it cost the man $50,000 and the rest was paid on his behalf. What would he have done if that charitable organization did not exist? Poignant to rip the tears right out of my eyes, he, with some help from the reporter, finished up the interview with his delight that the health care bill passed because nobody should be placed in his situation–everyone deserves health care. Everyone deserves it. You deserve it. I deserve it. He deserves it. Because we’re all worth it.

Does a gambler deserve to be reimbursed for gambling his life’s savings away? Then why does this man, or anyone like this man, deserve (to have earned or merited) health care? For the mere act of breathing sweet air into his lungs? According to the reporter, this man was able to, and did, pay the $50,000 required of him. If he could pay $50,000, he could afford insurance. As Dennis Miller put it so plainly, “I want to help the helpless, but I could care less about the clueless.”

I feel bad the guy got cancer. I don’t feel bad he’s out $50,000. If you’re prepared to gamble, you better be prepared to lose.

Except me. Wikipedia defines insurance as “a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss.”

In other words, insurance is basically a big group of people that are willing to pay a little now to prevent the possibility of paying a large amount later due to some unfortunate, unforeseen occurrence. Insurance can exist because only a relatively small portion of insured are going to become critically injured or sick. From another perspective, this means that a majority of the insured are putting in more than they are taking out. But they keep putting money in because they know they may someday be one of the lucky losers. Not all the insured will or can be lucky losers; not enough money would exist to pay for the expenses. Insurance would cease to exist.

Some people, politicians or otherwise, feel it’s a discriminatory act to deny someone coverage because of a pre-existing condition. After all, someone with a disease has even greater need for insurance than someone who does not. While I agree, I do not agree they reserve the right to be granted insurance after having being diagnosed. Insurance is not a charity nor is it welfare. It is a hedge against risk and those who have been hedging for years should not be required to pay for someone who has failed to do so.

Let’s imagine this hypothetical scenario. One day the government drafts a program to help subsidize cars and has decided to fund it with approximately $3 billion. I know, I know, it’s a crazy stupid idea but stick with me. To make it sound a little more legitimate and family friendly we’ll call it something like Cash for Junkers. Since there are approximately 300 million citizens, the government has decided to pay for the program by randomly selecting one out of everyone 1,000 people to pay $10,000.

“Wow,” you say, “What if I’m the the lucky loser? I can’t afford a sudden $10,000 fee!” So you get together with some of your friends, family, and neighbors and find 999 other people that would like to spread out the risk. You figure that odds are one of you is going to be a lucky loser, so you each agree to put in $10. The lottery day comes and sure enough, one of your peeps is chosen to be a lucky loser. Lucky him–he’s only out $10! Soon after the lottery some of your other neighbors that decided not to put $10 into the pot come knocking on your door and say, “Hey, you know that ‘spread the risk’ thing you were talking about doing? Can we join now?”

Hellz no! Does that seem “fair” to you? Does it seem “fair” to the other 999 that decided to hedge their risk? Regardless of your reason to not throw a Hamilton into the pot, you didn’t. And you’re not going to make other people pay because of it.

This is insurance. Why can people complain to no end about insurance companies not allowing pre-existing conditions? Because they can blame insurance companies, the facade, not the people who are already paying their dues. Can you find a big group of people that want to allow pre-existing conditions into their pot and pay more because of it? Then you start an insurance company.

Before you determine I’m a purely heartless soul, let me give you some background. My own family has sought a health insurance plan when going from a government-sponsored health plan (my wife was a teacher) to an individual plan (I was working for a start-up that didn’t have group insurance). And I was planning on knocking my wife up soon (which, by the way, qualifies as a pre-existing condition if I were to have knocked her up within one year of signing onto the new plan). For several years we were also only on the giving end of insurance–dumping money into the pot and hardly ever taking any out. On the other hand, over the last three months we’ve been the lucky losers and have taken out several times more from the pot than we’ve ever put in.

More than anything, I’m as frustrated as you are that changing jobs means changing health insurance plans and dealing with pre-existing conditions. But let’s not fight the wrong battle. Pre-existing conditions are not the problem, third-party pay systems are. Why can’t you stay in the same insurance pot when you change employers? Why do employers have anything to do with it anyway? If I never have a lapse in my health insurance plan, then I don’t have to worry about pre-existing conditions in the first place. Stay focused on the real problems, not the latest political cusswords.