The Trump administration is loosening the rules on when and whether employers must pay for contraception. This has enraged half the country. The truth, however, is that using insurance to pay for contraception is simply insane.

Using insurance to pay for any predictable and ongoing expense, not just birth control, is insane. Almost any other system, from private pockets to government just making it free, is a better solution.

The English and American languages are able to illuminate this point. They both distinguish between insurance and assurance. Insurance is when we pool the risks of some event across the population, perhaps a subset of it, so that we can indeed deal with low-probability, high-cost events. Assurance is a possibly tax-favored method of saving for some high-probability, not excruciatingly expensive event.

Take, for example, a house fire, one where the whole thing goes up. Assuming you’re not in California wild fire territory, this is a low-probability event, well under 1 percent likelihood in an entire lifetime for an entire gutting of everything you own. It’s also entirely disastrous financially, that destruction of everything including the one major asset of most families, the house. We thus each chip in some fraction of a percent of our income each year and pool the risk. Those whose houses are burned down are insured and can rebuild.

Burial insurance isn’t insurance at all. Barring those lost at sea, the corpses of us all will have to be dealt with in some manner. This is an entirely predictable expense, so why not save for it? Why not even have some tax-advantaged way of doing so? This is what assurance is — burial assurance is the correct name for what is sold to pay for your funeral.

Which brings us to healthcare. Quite clearly, we’d like everyone to actually have healthcare. Even the most devoted acolyte of Ayn Rand would agree that we’d not like infectious diseases to make a comeback, meaning that at minimum we’re going to have some public health work. As Adam Smith pointed out in his more important book, The Theory of Moral Sentiments, humans possess and display empathy too. We’re simply not going to allow cute little tots to die of something we can cure for $20 — not here at home, anyway.

The question is how to maximize health coverage. Maximzing health insurance isn’t the correct answer, for there are two entirely different parts to healthcare.

The first is the insurance part: scraping us up off the road after that car crash, or dealing with some horrible cancer. These are low-probability events, and except for the very richest among us, we can’t deal with them from private financial resources. Thus we pool the risks and use the insurance model.

Getting blood tests, vaccinating kids, and even access to contraception, are generally inexpensive and routine. We might well decide that some sort of tax-favored savings scheme is appropriate for these, but using insurance is insane.

When almost every adult woman is going to use some form of contraception for a decade or two of their lives, what is the risk pool that we are sharing this tiny expense across? Why on Earth pay an insurance company, with their associated costs, for a regular and routine $20 a month expense? Note that this is equally true of any other routine expense, such as vitamin supplements.

It isn’t that people shouldn’t have contraception — sex is far too fun and important for that — it’s that the economic model of insurance isn’t the correct method of providing it.

Which brings us to the larger debate on healthcare itself. Everyone should have access to healthcare. But it should be provided in an economically rational manner.

To do so, we have to understand the difference between insurance and assurance. The major mistake in the current debate is to think that all healthcare is the same and thus must be financed in the same manner. It isn’t. Two systems would be best.

Note that this is true whether we talk about government-run healthcare or private healthcare. We still need to distinguish between the pooling of risk of low-probability, expensive events and the payment for routine care. They’re different things requiring different economic structures — insurance for one, assurance (if anything) for the other.

It isn’t that a healthcare system should or should not be providing contraception, it’s that insurance is simply an insane way of paying for it.

Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute.

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