OK, so right now we’re in the middle of a severe economic crisis brought on by the collapse of credit markets due to the careless assumption of a high volume of risky loans that could never be paid back.
Obama’s plan for health insurance goes like this: force insurance companies to take on high risk insurees at any time at artificially low rates.
Insurance companies work sort of the opposite of lending companies. A lending company gives you a lot of money that you pay back in increments, with interest. Insurance companies take money from you in increments, which they earn interest on, and pay it back to your health care providers in the event that you need expensive health care.
Explain to me the financial stability of Obama’s approach, especially given the now quite clear economic fallacy at play in taking on high risks without the capital to support them?
Under Obama’s plan there’s no need to own health insurance until you need it to pay out, meaning that all of the capital the insurance company would use for pay outs does not exist. Maybe what we need is some kind of Government Sponsored Entity to back those high insurance risks, something like a Freddie Mac or Fannie Mae. Oh wait, that didn’t turn out very well.
Insurance companies will face just as severe, if not more so, a collapse as the mortgage lenders have under this kind of plan, and the government will have to become the sole insurer with increased taxation providing the capital. Judging by the way government usually manages this kind of big bureaucracy, you can well expect the program to result in either huge tax increases or enormous deficits. Likely both.
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