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Unfortunately “fair” insurance - one where everyone pays the same premium - is an unstable equilibrium without regulation. As others mentioned, self selection w

Unfortunately “fair” insurance - one where everyone pays the same premium - is an unstable equilibrium without regulation. As others mentioned, self selection without regulation leads to the fair carrier getting the highest risk population, effectively leaving it no money to pay out. It is definitely a race to the bottom. There is the other unstable equilibrium if insurance is fully fair but non compulsory - it’s participation bias. What’s the benefit of getting insurance now when I can get it right before I go to the doctor (health) or on my deathbed (life)? Obviously at that point there’s no insurance - risk dilution - it’s a subsidy. Which makes the only way to have fair insurance is to require everyone to have it and enforce very simple underwriting criteria. It will also require most folks to pay more than they could otherwise. Unfortunately the US has historically been bad at attempting to pass a law with that kind of effect, though the ACA got closer than most attempts before the recent changes.

cr1895 8y ago
I believe this is more or less how it works in the Netherlands. Insurance is private and not directly paid by the state unless you're under 18 or you cannot afford it (but then subsidy is given to buy private insurance). Insurance is compulsory for everyone. It is well regulated. Insurers compete on premium options, hospital choice, etc. In practice, monthly insurance premiums are around 110-130eur per month with a minimum deductible of 385eur. GP visits don't cost anything additional and only specialist care eats into the deductible.
clhodapp 8y ago
We do have a technique for battling the second issue you point out at least: open enrollment periods. Of course they are kind of annoying and aren't generally viewed as acceptable for individual policies.. Maybe the some of effect could be mimicked with coverage start delays and/or extending the minimum length of coverage you can purchase.

cr1895 8y ago

I believe this is more or less how it works in the Netherlands. Insurance is private and not directly paid by the state unless you're under 18 or you cannot afford it (but then subsidy is given to buy private insurance). Insurance is compulsory for everyone. It is well regulated. Insurers compete on premium options, hospital choice, etc. In practice, monthly insurance premiums are around 110-130eur per month with a minimum deductible of 385eur. GP visits don't cost anything additional and only specialist care eats into the deductible.

clhodapp 8y ago

We do have a technique for battling the second issue you point out at least: open enrollment periods. Of course they are kind of annoying and aren't generally viewed as acceptable for individual policies.. Maybe the some of effect could be mimicked with coverage start delays and/or extending the minimum length of coverage you can purchase.