Insurance
History
William P. Bednarz:
"To know a thing, it is helpful to know where it came from—and insurance, like many modern institutions, came about in the midst of the Reformation. The first clear example of contractual risk-management can be found in the Protestant “Hamburg Fire Contracts” of 1591. This insurance contract did not protect houses, horses, or health—but breweries. At the time, it was not uncommon for the fire used in the malting process to get out of hand and burn down the facilities. The contract stated that the 100 brewery heirs in Hamburg, Germany mutually agreed to pay 10 Reich Thalers to any victim of fire damage among them. Payments were contingent on the severity of damage and were to only be paid if the building was completely rebuilt within a year.
A similar pact was formed by a group of Christian Mennonites in 1623, called the "Tiegenhöfer Fire Regulations." These Mennonites were adamant that the organization was congenial to the scriptures and an example of fraternal aid. According to The Mennonite Encyclopedia, “The principle of sharing losses is an old one among Christians. Mennonites from their earliest history have practiced it as an integral part of brotherhood life. Sharing is, however, not thought of in terms of systematic and selective risk-bearing modern insurance.” Their agreements differ greatly from modern insurance systems: benefits payments are small, the agreements are entirely mutual, there are no payments to administrative officials, and membership is typically limited to church members. Many Mennonite groups are in strict opposition to modern forms of life insurance—going so far to excommunicate members who bought it—as “it reflects trust in man rather than in God.”
Obviously, modern insurance companies have left this model far behind. Whereas these Hamburgians and Mennonites knew one another and signed up to help one another in case of disaster, modern insurance companies operate as a for-profit business. Their list of clients is astronomically large: each of the three largest health networks enroll over 40 million members. Obviously, these 40 million people do not pay one another directly or know where their money is going. This does not breed the “brotherhood” that the Mennonites sought to cultivate. Why does this matter?
Even though the fire contacts required gifts to the devastated parties out of binding contract, the fellow members knew exactly where their Reich Thalers were going and what good they were doing. Modern insurance companies require prepaid premiums on a monthly basis, which are then used to pay off enrolled members claims. There is no knowledge of the person to whom the payments are allocated. This encourages a shift in the motivation with which we give our money. The individual Mennonite was acting self-interestedly, but not selfishly, in his insurance model: he hoped to help himself in and through helping the community in which he was embedded. It was not an act of almsgiving, in which a gift is given to them. It was an act of solidarity, in which the gift to us—to me and them, united in our common need. But modern insurance is a gift given to me, for my own sake. I do not know or care who receives my premium, rather, paying the premium is my means of limiting the cost of my own future catastrophes. It is true that this premium is only effective in serving me insofar as it serves others, but this service of others is not a part of my motivation. If, by some different system, the same money mitigated my health care costs without ever helping others, I would just as willingly pay it. Fear, and not solidarity, is the reason for my "gift".
The clients of insurance companies find a certain financial stability in a sea of unknown people: a larger pool of participants equates to less overall risk. But it also leads to more overall costs. First, because of their size, modern insurance companies have higher administrative costs. Second, because they are for-profit companies, a successful insurance company isn't one that simply provides relief for victims, as in the case of the Hamburg Fire Contracts: success means making a profit. Most insurance companies abide by an 80/20 rule: 80% of premiums must be paid toward claims while the rest goes to other business operations and profit. By buying insurance, one is only partially paying for the well-being of others in the network. He is also supporting the corporation's profitability (especially in the salaries and bonuses of their CEOs) and its investments in the stock market. To offer a substantive example, in 2020, United Health earned $201.4 billion in premium revenue and spent $2.8 and $4.2 billion on market investments and share buybacks, respectively. While investing in stocks and engaging in financial engineering may seem like a clear departure from the purposes of an insurance organization, most claim that this activity increases overall profits and hypothetically reduces premiums. It may indeed increase profits. Whether it reduces premiums is doubtful: they only continue to rise.
Because insurance companies aim to make profits, and subordinate serving people as a means to that end, they are radically exposed to cost-inflation on the part of medical companies–which are also profit-driven. Hospitals are not billing consumers with limited funds, but an insurance company, invested in the stock market and turning a large profit: There is no clear limit to how much one might demand for a drug or a procedure. The avarice of one inspires the avarice of the other.
Between covering unethical procedures, making market investments in who knows what, raising costs, and reaping unreasonable profits, modern insurance seems like a bad deal for Christians. But there is something more worrisome than their use of our fear to turn a profit: as mentioned, the insurance model makes it difficult to attain certain social virtues, like charity, goodwill, honesty, and affability."