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From the article: This allows the insurance companies to keep insurance costs down for both the insured and the insurers. No! Mathematically the insurance busi
by dzdt 8y ago
From the article: This allows the insurance companies to keep insurance costs down for both the insured and the insurers.
No! Mathematically the insurance business works the same as long as the average premiums cover the average costs for the pool. Identifying higher risk individuals and charging them more does nothing to lower the average cost as long as they continue to buy insurance. It only spreads the costs around differently.
That is, unless the idea is to make the cost so high for risky patients as to force them not to participate in the pool.
Which is I guess what they are saying. It does lower average premiums in the pool the only way mathematically possible, by forcing at-risk or sick patients out of coverage.
This raises average costs for the original pool (from before some patients were priced out) because those patients forced out will show up later at emergency rooms with expensive problems and no coverage. But that is no longer the insurance company's problem, so who cares.
Well at a society level there is no forcing people out other than death. So unless we can get enough sick people to die quickly and cheaply this system just forces higher costs on everyone.
Or maybe we could just cover everyone in one national pool without keeping a secret database of everyone's health history to use against them and gouge them more?
- netcan 8y agoI think of it this way: Say insurers know nothing about customers, just an anonymous number. In this world they would have to charge everyone the same, the average cost of insuring a person. Everyone pays the same premium, and has all their medical bills paid. In a parallel world, insurers have perfect information. They know your medical future, not just the history. In this world, insurers will price your premium at exactly the cost of paying your medical costs. If you won't have to go to the doctor this year (this is a world where insurers know the future), you won't be charged anything. If you're going to be in a car accident, you will be charged for surgery and rehab. In world no. 2 where insurers have maximum knowledge, insurance basically doesn't exist. Insurance is exactly the same as just paying your bills directly. In world 1, insurance works fine, but a 19 y/o pays a little more than they do today and sick or elderly people pay less than in the real world. As data/information becomes more ubiquitous, we travel down this continuum.
- TeMPOraL 8y agoYup. I wish we could travel up this continuum, but then the real problem shows up: you need to figure out a way to stop health service providers (and their providers) from sucking your general insurance budget dry. Otherwise, you'll find that an increasing amount of people can't afford their payment.
- AlexandrB 8y agoThe solution to this problem is single payer. Where the insurer (government) now has negotiating power on prices because they’re the only game in town.
- deleted 8y ago[deleted]
- cabaalis 8y agoThat is one solution to one problem. It has the side effect of overly simplifying American systems of governing and labor, and would cause new side effects or amplify existing ones.
- twoodfin 8y agoThe US government is essentially the only game in town for military hardware and contracting, but I don't think anyone would hold up that procurement system as a model of efficiency.
- jjoonathan 8y agoIn the world of health care, many developed countries have single-payer healthcare and the US pays twice as much for everything as all of them. If goverment-run health care is inefficient, why is our "free-er" system half as efficient?
- twoodfin 8y agoMy point is that it's probably something other than monopsony effects.
- ataturk 8y agoHilarious! I work for a major publicly-traded health ins. co. Our CEO is one of the highest paid people in the state, so is the 2nd in command, and 3rd, and a few more down from there. It's insane how much money is eaten up in ways that do nothing at all to insure individuals, but they make big talkie talk about all of it. I would say that in my organization, for every 10 people that work here, only 2 do actual work. It's not about forcing sick people to die, it's about an inefficient corporation that soaks up billions to return very little in actual value. BTW, I have always prided myself with my ethics in the sense that I would never work in the "defense" sector, etc. I am thinking that big healthcare is a breach of this same type of ethic. I am at a crossroads in my career as a developer, and I really want to just get away from it all, but I'm 45 with two kids and I need at least another 5 years of work before I can downsize and escape the corporate grind for good. It sucks, though, I won't spritz it up. We should just have a revolution in the US.
- kozikow 8y agoInsurers with more data can create incentives to stay healthy. E.g. insurer could tell you "if you lose 10 pounds your insurance is going to decrease by X".
- gowld 8y agoOr they could say "if you eliminate your cancer genes your insurance is going to decrease by X". See the problem?
- nerdponx 8y agoas long as the average premiums cover the average costs for the pool Not even. In P&C insurance at least, the premiums are invested. Even if you operate at an actuarial loss (i.e. you pay out more than you receive in revenue), you can still make a profit on the investment income.