After hail damages the roof of your house, your homeowner’s insurance is supposed to pay for the repairs. But there is no requirement that you continue paying premiums while your roof is being repaired. And if you switch to a new insurer, the new insurer doesn’t pay for damages incurred while the previous insurance was in force. These same principles apply to auto collision insurance and every other form of casualty insurance.
If you get sick, your insurer won’t keep paying medical bills unless you keep paying premiums. If you are unable to switch plans (because your new pre-existing condition causes you to be rejected or face exorbitant premiums), you are stuck in a continuing relationship with your existing insurer — regardless of the quality of service or the premiums charged. If you are able to switch plans, the new insurer has to start paying your medical bills, even though the illness (and all the premiums paid up to that point) occurred while you were on some other plan. This is why the new insurer doesn’t really want you and has no incentive to treat you well after you arrive.
To make matters worse, healthy people always have an incentive to leave a plan after some of its members get sick. The reason: the new plan formed by healthy people can charge much lower premiums. Meanwhile, premiums in the original plan (which now has only sick people) must rise to ever higher levels to keep paying the medical bills.
In a very real sense, health insurance isn’t insurance at all. It’s the artificial product of unwise tax and regulatory policies. But fret not. There is an ingenious solution to all this.