RD spoke quickly and was wrong. He claimed the difference between health and auto insurance was the risk profile. His claim was:
"the primary difference is the distribution within the dataset. Auto insurance costs having a fairly even distribution of costs through its dataset and a comparative marginal worst case cost cap, No insurance will pay to fix a car where the cost of fixing is higher then replacement."
The opposite is true. The distribution of claims with auto insurance is absolutely wild compared to health insurance. There is a large number of people who never have a claim against their auto insurance. A person driving a car through a crowd of pedestrians or causing a multicar pile up can rack up millions of dollars in liability in an instant.
Since everyone needs to spend money to maintain their health, there is less of a deviation in health expenses over one's life than with auto insurance.
There is often a great deal of variance per year throughout a person's life, however, the variance in medical expenses over a person's lifetime is not that great ... especially if we were to adopt preventive medicine.
The whole point of the Medical Savings and Loan is that, when you look at people from a whole life perspective, there is not as much variance in expenses as one would first suspect. When I did this experiment before, I discovered that there was a very nice bell curve with most people's life time health expenses sitting between reasonable figures like $300,000 to $600,000. With guidance, all but a few people could self fund their care.
This is not true of auto insurance where there is a wild difference in expenses. Each year only a fraction of people have claims. A small number of claims reach into the stratosphere.
The primary difference between health and auto liability insurance, as far as public policy is concerned, is that auto liability insurance is driven by the court system. Liability go through the court. If not for insurance, health care would be a matter of private contracts between patients and providers. Buying health insurance invites the court system and government into the care of one's health.
I know this for fact because, when I buy health care from my own pocket, I pay a bill negotiated with the doctor. When I use insurance I file a claim against a pool. Paying a bill is different from filing a legal claim. The first involves direct negotiation. The second is controlled by a court.
When I run a widow with an SUV full of orphans off the road, I am not involved in negotiation. I am involved in a court case. The amount paid gets decided by claims adjusters, appraisers and a judge with greater sympathy to widows and orphans than overweight computer dinks.
There is another substantial difference between health care and auto insurance. Auto insurance is about the liability of a single instance. Health insurance involves the whole series of things we do during our life to maintain our health.
I will write a second post on this matter in the near future.