Obamacare Loses the Bet

Sometimes I hate being right.

I've been talking about the "arithmetical absurdity of Obamacare" and the common version of health "insurance" for nearly eight years. Not long ago, I pointed out that the insurance that was available from the exchanges, for individuals, was excessively expensive and had poor coverage.

Since then, about half of the Obamacare co-ops -- nonprofit insurance companies created with startup funds from the government to provide insurance on the exchanges -- have failed and either have gone out of business, or are in the process of doing so. What's killing these co-ops? Oh, there's some fraud, and there's some Democratic Party cronies who made some big money, but what's really killing the co-ops is something much more unrelenting than fraud, much more insidious than cronyism.

What's killing the co-ops? Arithmetic.

I won't go into great detail about how insurance works here. I've done it before, both laying it out mathematically and in a little parable appropriate to the season. The basic thing is that insurance is a bet: you bet someone that something bad is going to happen, and that someone takes the bet.

People accepting bets from the public used to be called "bookies" but now they're respectable and they're called "insurance companies." But it's the same business: the bookie takes bets from everyone, and tries to make sure that the bets and the odds work out so he makes a little money, or at least doesn't lose his shirt. But if the bets go bad -- the Broncos beat the Patriots; or a glue-factory candidate is spooked by a firecracker and outruns the field, the jockey barely clinging to the saddle, and pays off 100 to 1 -- the bookie can find himself with the momentary embarrassment of lacking the funds to pay off the bets.