Thursday, 15 October 2009

But Wait, There's More!

I read that the health care bill in the House (or maybe the Senate - it's a lot to stay up on) would only allow underwriting (defined by me as the charging of higher premiums or not offering coverage to certain customers based on their risk profile) for age, tobacco use and a very few other factors. So the long and the short of it seems like if you are an insurance company and want to be in the business of health insurance at all, you need to more or less charge everyone the same rate. To continue yesterday's comparison, you have to charge the teetotaler who's never had an accident or ticket in his/her life the same rate as the guy who gets in an accident every couple of months. Since tobacco use is so generally vilified, we will compare users to DUI people and say that you can still charge them through the nose.

As Baseline Scenario notes, this leaves it all down to marketing. Maybe this will be good for cycling teams, since at least in the US their audience would seem to be healthier people and marketing to healthier people would be a good thing. But then you will have some companies doing a good job of this, some companies doing a poor job of this, and then the companies which do a poor job will go away. That leaves the public to pay for the higher risk consumers.

So not only do we wind up paying enormous subsidies to produce enough corn syrup to give the entire world Type 2, we'll wind up with a public tab for the downstream consequences of same.

Don't worry, though, the corn and junk food lobbies are doing their best to prevent any taxation on the consumption of their products. Have you seen those ads with the concerned (and nominally attractive and very slim) soccer mom (with her two slim kids) unloading about 4 gallons of soda and bags of junk food, telling you about how these taxes are going to pack a wallop for her family's budget? MAYBE IF YOU PEOPLE DIDN'T PUT KOOL-AID AND SODA IN THEIR KIDS SIPPY CUPS, THEY'D AVOID THESE ONEROUS TAXES?!?!?!

So yes, Jim, my stance on this is libertarian. I don't think we should subsidize the production of shit, and I don't think we should dictate how private companies underwrite, and I don't think we should screw around with behavior based taxes and incentives. But if we are in the business of subsidizing shit, and we are getting into the business of mandated underwriting practices, then we should also be taxing behaviors with guaranteed bad outcomes. I'm libertarian by mindset but this is obviated by reality. We are encouraging bad behavior and socializing the penalties for them. I don't believe that the government should be influencing people's private behaviors, but I also believe that the consequences of bad behavior should be borne by those practicing them. We put all of these incentives out there for people to buy homes, and now we are bailing out banks and individuals. It just keeps getting better and better.

In even scarier news, I present a riddle: What's higher than 4 but lower than 2? I'm now a 3.


Sigberto said...

YEAH!!! Congrats pal. Glad I'll get to line up with you more often.

Drew Armstrong said...

Actually, the Finance Committee bill allows rate band variation of up to 6:1 based on age, tobacco use and family composition. So insurers would be allowed to charge certain customers up to six times more (I think the other bills are more restrictive, but as somebody who does this for a living, I'd bank on something close to this one). That's pretty substantial--even if less than the largely unlimited rate band variation allowed now (which is regulated at the state level).

Jim said...

Can you think of any area of our lives that couldn't be improved by a trillion dollar congressional and regulatory intervention? I can't.

Chuck Wagon said...

Bert, yeah finally.

Drew, the magnitude and the bit of latitude is good, but they're still underwriting based on only 3 parameters, 2 of which are out of the consumer's hands. In the eyes of this legislation, tobacco use is the only extant bad behavior. An older person with negative family composition and who smokes but otherwise takes care of himself, exercises, eats well, etc pays through the eyes. A young non-smoker with better family composition who never gets off the couch and subsists on fried butter (it exists) and Hyper Gulps pays what you and I pay. The differences? You and I are going to cost the system nothing, the old smoker is going to go ahead and die soon and the young lardo is going to linger on expensive meds for decades. Weak.

Jim, not a single one.

Drew Armstrong said...

Well, family composition isn't out of your hands. Don't want a big family and higher premiums? Don't have kids. Ditto the smoking.

Several versions of the legislation out there do, however, allow for "lifestyle discounts" at the employer level--basically, authorizing your employer to charge you less if you're healthy.

And, for the record, you and I are not going to cost the system "nothing." As you pointed out earlier, you cost the system $30k last year. Everybody in your insurance pool is paying for that. Under your logic, you should be, not me (since your lifestyle choice put you in that situation). Which is fine if you want to take that gamble, but that's not insurance (pooled risk)--that's putting your health care coverage on layaway.

Chuck Wagon said...

Didn't really know what you meant by family composition. And that's simply a multiplier. I don't pay more for me because I have kids, I pay more to cover my kids. That;s multiplication, not underwriting. All the difference in the world.

After 15 or 16 years of my employers paying the system $8 or $10k per annum, using maybe - maybe - $800 of services per year, I'd absolutely classify my cost to the system as "nothing." If I could join a mutual health insurance company with a pantload of me's in it, I'd do it tomorrow. Absolutely. If I didn't get it for nothing at work no matter how much care of myself I do or don't take.

I can't imagine how the employer is able or motivated to charge me less if I'm healthy. They shift the cost from me to someone who's unhealthy while their total cost stays the same? No offense to my employer, but they're in no position to make that judgment.

My word is now "essese" which is clearly a form of the German verb "essen" which means that even the damn interwebs want us to drown in bratwurst.

Flanagan said...
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