They say that actuaries have the highest job satisfaction of anyone. Which is slightly surprising, given that they make their living by determining the probability that someone will have horrible things happen to them based on demographic information. More than a little morbid, if you ask me.

The thing about insurance–any insurance–is that it relies on pooling people with a similar predictive characteristic together and then charging all of them an equal rate. This means that as a 22 year old male with a new sports car, I pay a rather high rate, clean driving record notwithstanding. Obviously, while I might not be a particularly high risk, 22 year old males in general–with all their impulsiveness, bravado, poor decision-making, and drunken habits–are.

With health insurance, you can’t get away with that kind of thing. So an obese 45 year old with diabetes and hypertension pays the same rate as a healthy, fit 30 year old for the same comprehensive insurance. This is important to remember. It’s almost socialistic in its ‘to each according to his need, from each according to the average expenditure’ mentality.

Keeping that in mind, let’s move back to the car insurance analogy. In high school, I drove a 1998 windstar with 100,000 miles on the odometer. I had liability insurance. The car simply wasn’t worth the extra expenditure for comprehensive. Because I road tripped pretty frequently, I payed a little extra for roadside assistance, although most of my friends did not. Now, driving a car I’ll likely keep for the rest of my life–one that is and will be worth considerably more–comprehensive insurance is a more prudent move as I see things.

But you could take things still further. With my little brother off to college, my father’s contemplating something fancy and european. One of those makes that includes servicing and maintenance in the price. This is essentially what you pay for with ‘health insurance’. Not only protection against illness and injury, but for prescription drugs, for visits to the doctor and to specialists, and in some cases for dental and eyewear as well. Even if you simply don’t need such a level of protection.

With automotive, home, and life insurance, several levels of coverage are available depending upon the consumer’s ascertainment of risk and the size of the potential loss. Most would consider this a good thing. However, this attitude disappears when it comes to health insurance.

Mitt Romney in his infinite wisdom has decided to force every citizen of Massachusetts to carry comprehensive health insurance. He uses the specious logic that since we require that all drivers carry car insurance, we should do the same for health insurance. We are required to carry liability insurance, not comprehensive. The idea behind these laws isn’t that we are protected, but that our potential victims are. No such correlate exists for the health insurance situation.

He isn’t alone in this. As I mentioned not too long ago, the AMA is supporting such legislation on a nation-wide basis.

Leaving out finer discussions on the nature of liberty (which if better understood, would have prevented such a mess), what we have here is a destruction of choice. Through years of well-intentioned but misguided legislation, choice in the level of coverage has been eroded when it comes to health insurance.

Simply put, not everyone needs the same level of health insurance. Earlier in his career, George Bush championed medical savings accounts coupled with catastrophic health insurance. It was one of the few brilliant suggestions he’s ever made. For tens of millions of people, all the extra services HMO or PPO coverage gives you simply are not needed. And in the rare cases they would be, catastrophic coverage would ensure you wouldn’t be left footing a bill rivaling property prices in Southern California.

In my short time on this earth, I’ve had a car wreck with injury, a debilitating nerve condition (caused by an unneccessary vaccine pushed by the Public Health Department), and a visit or three to the emergency room. But, if I’d have had to pay out of pocket, in none of those years would my total medical bills have been equal to the cost of health insurance.

Many people are simply too low-risk to need such expansive coverage. And when they are forced to partake in it through legislation, they end up paying for services they will never use. By stratifying levels of coverage, people would be able to choose policies commensurate with the potential for need. Younger, healthier individuals would be able to choose inexpensive options like the one proposed by our President. They might have to pay out of pocket for a visit or two to the general practitioner, maybe a shourt course of antibiotics or painkillers, even an x-ray or two. But said total would be quite literally a small price to pay when compared to the alternative.

Those with young children, or who are predisposed to certain illnesses, might choose a higher level of coverage which might include visits to the pediatrician, some medications, and specialists. But even they would find it largely unneccessary to seek insurance to cover the cost of a visit to the GP or the more routine laboratory tests.

And of course, some would choose the comfort of as expansive and bloated a plan as those that Governor Romney and the AMA feel we have a ‘responsibility’ to purchase. But as things currently stand, people are paying for services that they don’t and may never need. It is an inefficient allocation of resources that hurts the consumer. They are forced into what is in many–if not most–cases a poor decision. And who profits off of this inefficiency? The managed care providers, of course. How did they end up in this artificial position? Through government mandate and legislation.

Tommorrow, a look at the various factors that have conspired to limit our choice in this regard and how to change things in a way that would lower costs for everyone.