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> Insurance carriers set their rates based on actuarial models designed to predict the likelihood of future events. Sure, until the government says that you ar

• Danihan 9y ago
  Government regulations: the cause of, and solution to, all of our problems.
• frgtpsswrdlame 9y ago
  You believe that insurance companies should be able to charge different rates on the basis of race?
  • wyager 9y ago
    As far as I know, there is no strong relationship between race and lifetime insurance expenditures. Hypothetically though, yes, insurance companies should be allowed to make optimal decisions based on full actuarial information. Anything else, besides being sub-optimal and confounding the effectiveness of market mechanisms, would amount to the effective intentional transfer of wealth based on race, which is morally much worse than rational actuarial pricing that incidentally involves race as a predictor.
    • frgtpsswrdlame 9y ago
      That seems to ignore a history of discrimination based on the characteristics the government has labeled protected. See: https://en.wikipedia.org/wiki/Redlining https://en.wikipedia.org/wiki/Redlining
  • thehardsphere 9y ago
    Some diseases are correlated with race. Like, sickle cell anemia.
    • ceejayoz 9y ago
      That doesn't mean it makes sense to charge different premiums. Insurance only works if the group is large and shares the risk. If you break it down on race, gender, age, and the thousands of other physical characteristics that correlate to something medically, you wind up with groups too small for insurance to work. We don't charge black people lower Social Security and Medicare taxes on account of their lower life expectancy, right?
      • wyager 9y ago
        > you wind up with groups too small for insurance to work. This is quite simply not true, and I can't help but think that this statement comes from a very fractured rule-of-thumb understanding about how insurance works. Insurance works by charging you around (naively slightly more than, but actually usually slightly less than) your expected cost to the insurance pool. It doesn't matter if different pool members have different costs; as long as you charge them appropriately, insurance continues to work fine. Why do you think that charging different amounts to different customers would require splitting the pool?
      • thehardsphere 9y ago
        You set the premiums based on the expected risk of an event happening, for any type of actual insurance at all. "Actual insurance" is supposed to be a financial product that people purchase to mitigate financial risks of some future event that may or may not happen. If the bad thing happens, you make a claim and the insurance company pays you a lot of money. This system works most things because most people don't make claims. What we call "health insurance" in America has gotten away from this model and that's one of the reasons why it is expensive and was horribly broken before 2009. Trying to cram everyone into one giant pool and charge them all the same amount of money in the hopes that the pool will be big enough is not working either, and doesn't solve the underlying problem with that system, which is that people make claims all the time and the insurance company often must pay. Thus, it becomes the customer and the entire transaction is less about serving the patient and more about milking the insurance company for every penny. > We don't charge black people lower Social Security and Medicare taxes on account of their lower life expectancy, right? Taxes aren't insurance premiums and those programs don't function as actual insurance; they're "social insurance" e.g. The federal government definitely makes payments to everyone who qualifies, no matter what happens to them. And taxes used to fund the program get spent on everything the government does, not just to fund those programs. So, this really isn't relevant to the question of what an insurance company should be doing.
• dtnewman 9y ago
  These points are relevant to health insurance, but in the second footnote of the article, he explicitly states that he is talking about property and casualty insurance. In a pure sense, what we call health insurance isn't really pure insurance. To give a simple example, in property insurance, I pay let's say 2% of the cost of the item per year to protect something that the insurance companies deem to have a 1.5% chance of getting destroyed. That 0.5% difference is their expected margin. But in the case of health insurance, I get that coverage for catastrophic events, but I also get discounts on healthcare for being on a plan. Insurance companies negotiate better rates with providers, which makes the market vastly more complex. So that's why the author of this post says explicitly that he's not talking about health insurance.
  • wyager 9y ago
    I missed that footnote, thanks. And yes, that's my point; many people mistake "health insurance" for an insurance market because of the name.
  • uiri 9y ago
    Typically premiums are equal to or less than the expected payout for a given policy. Insurance companies make most of their profit off of the float (return on investments made with premiums as the principal). Health insurance really ought to be separated from a health plan which covers entirely predictable and expected expenses.
    • dtnewman 9y ago
      Interesting to learn that!
• ceejayoz 9y ago
  > TL;DR If you're a reasonably healthy man below retirement age, you're getting screwed hard. You say "screwed", I say "contributing to society". > Actual insurance markets without coercion are a net positive for all participants How do you have a coercion-free market when the consequences of not buying in can include "you'll die or be bankrupt"? I can choose not to own a boat, or a motorcycle, or a home. I can't really choose whether or not I get psoriasis or have a heart attack.
  • benjohnson 9y ago
    >> I can't really choose whether or not I get psoriasis or have a heart attack. Because being overweight can lead to adult onset diabetes, I'm choosing to slim down so as to have a better chance at living.
    • ceejayoz 9y ago
      That's wonderful, and many health insurers will reward with discounts for such behavior. Mine gives credits for gym memberships, for example. Not every health condition is preventable.
    • deleted 9y ago
      [deleted]
    • mfringel 9y ago
      The Ministry of Statistics has noted your datapoint, and thanks you for your contribution.
  • uiri 9y ago
    > You say "screwed", I say "contributing to society". How is a coercively collected subsidy for the health expenses of other demographics considered a contribution to society? Is trading one's labour for capital not enough? > I can't really choose whether or not I get psoriasis or have a heart attack. There are plenty of places throughout the United States where the only viable means of transportation is the automobile (or a motorcycle, as you point out). The consequences of not having auto insurance is also bankruptcy. Would you characterize the auto insurance market in those locales as similarly coercive?
• xenadu02 9y ago
  Car and homeowner's insurance only works /because/ insurers have imperfect data /and/ because purchasing it is mandatory in most cases (eg: auto liability is mandated by the government and homeowner's policies are mandated by banks lending against the purchase of a home). If you had perfect actuarial data it would mean you would charge predicted "losers" the entire cost of their expected claims plus your costs and profit. Conversely you'd charge the expected "winners" almost nothing because their premiums are pure profit. Insurance requires large risk pools to function as insurance. The entire point of it is that everyone in a large group pays in to cover those who suffer a loss. For healthcare (which is not what this article is about) that means collecting premiums from younger, healthier people to cover older sicker people. Healthcare is also the only kind of insurance where everyone is guaranteed to make claims - very much the opposite of most other kinds of insurance. The last point I'll make is that everyone gets older eventually. Higher premiums when you're younger are a form of pre-payment for the care that will absolutely be required when you age. Unless the government forces people to pay these premiums the most rational thing for any individual actor to do is cheat and skip paying premiums when young, then force the cost on others by buying in when you're old. It becomes a classic tragedy of the commons situation where only sick people buy policies, resulting in massive losses and sky-high premiums no one can afford to pay. Your argument basically boils down to "fuck other people" + "I'll never get old, I'm going to be young and healthy forever!". I don't want to live in that world. As a practical matter I'd also like to make it easier for people to start new businesses so I favor universal baseline healthcare coverage paid for by taxes. Shrinking hospital billing departments, insurance companies, and bill collectors would be a net win for our economy. I don't know why everyone believes scaling up drives efficiency for a startup, yet requiring every individual doctor to employ a bill collector is somehow a net win.
  • secabeen 9y ago
    > The last point I'll make is that everyone gets older eventually. Higher premiums when you're younger are a form of pre-payment for the care that will absolutely be required when you age. Unless the government forces people to pay these premiums the most rational thing for any individual actor to do is cheat and skip paying premiums when young, then force the cost on others by buying in when you're old. It becomes a classic tragedy of the commons situation where only sick people buy policies, resulting in massive losses and sky-high premiums no one can afford to pay. This is not true. People die young, some die quickly when older, with few health costs, others linger with huge costs. I can see an appropriate insurance product that protects against the risk of those varying outcomes.