11 ms·

Isn't the whole point of insurance the basic bet that I will need an expensive service so I will make small payments towards that possibility, against the insur

Isn't the whole point of insurance the basic bet that I will need an expensive service so I will make small payments towards that possibility, against the insurer's bet that I will not need that service and will instead be able to keep those payments as a profit? If so, that arrangement has been abused by using it for health care, instead of insuring against a low probability major health incident... It seems this would be the same as car insurance also paying for tolls, road maintenance, car maintenance, etc. instead of just covering against person/property injury from vehicle operation. If health insurance instead is used for typical day-to-day payments for health care coverage, then the costs of that insurance will logically exceed the cost of that care because the insurance company exists to make a profit through offering that service. Similar to paying the government to do something that would be more efficiently done privately - Maybe the same outcome (if one is fortunate) for far greater cost. Anecdotally, I used to have a health insurance plan that had a very high deductible and fairly low monthly payments for my wife and myself. It's sole purpose was to hedge the bet that one of us might need ambulance and major medical treatment at an expensive facility (hospital) that might break us financially without that hedge in place. The Affordable HealthCare Act in the USA ended that arrangement, we now have triple the payment size for a third of the coverage we used to have. To me, that is a clear case of my government getting involved and the results being a net loss. Edit: Sorry, it did not end that arrangement, it made it far, far more expensive.

decebalus1 7y ago
Exactly. ACA and any other business friendly arrangement proposed by the 'private sector' sponsored democrats (the proverbial 'establishment') will have that effect. Because it still 'stimulates' the business side of things to react in a way that makes it profitable. This should be an all-or-nothing type of deal.
thanatos519 7y ago
The point of health insurance is that nobody should worry about the costs of regular maintenance and emergency service to their meatbag. Ever. As you point out, it costs much more if there is a for-profit organization in the middle. Single-payer tax-funded health insurance means that each person contributes based on their capacity, and nobody has to pay when they receive services. Then the tax collector has an incentive to increase effectiveness of health services by educating and encouraging the population to eat well and exercise daily.
- entee 7y ago
  You had me until you said the tax collector has an incentive to increase the effectiveness of health services. Currently the largest medical payer in the US is medicare, a government program. It is also one of the most expensive programs the government runs. The government already has this "incentive" and yet we don't seem to be getting healthier nor do people seem to eat better and exercise more. People seem to be getting more obese, not less [1]. I don't know of a single organization or program that has managed to have long-lasting reductions in obesity. Diets routinely fail because people can't maintain them, and exercise by definition is hard so again it's hard to stick to. One fundamental issue is we don't quite understand why people get fat. It's not clear how the basal "fat" set point that everyone has gets set, but it is clear that deviating substantially from that set point is very difficult and that it might shift over time. [1] https://www.stateofobesity.org/obesity-rates-trends-overview/ https://www.stateofobesity.org/obesity-rates-trends-overview...
- waterhouse 7y ago
  > Then the tax collector has an incentive to increase effectiveness of health services by educating and encouraging the population to eat well and exercise daily. But then the population doesn't have an incentive to follow that education and encouragement—at least not a monetary one. As a comedian said, "You see, I don't have to exercise, because I have health insurance."
- James_Henry 7y ago
  With the ACA, insurance companies have incentives to encourage the people they cover to take as good of care of themselves as possible more than ever. I think they are currently and in the future will do a better job of that than the tax collector ever will. Especially when it comes to preventable diseases, good health insurance companies are doing some really interesting work on effective behavioral change and early intervention. My insurance for instance pays me to walk every day.
  - kevin_thibedeau 7y ago
    They are incentivized to boost their 20% cut. That doesn't work if everyone is too healthy.
tptacek 7y ago
I worry that this is the classical HN analysis: axiomatically derived from premises that seem intuitively true but are empirically false. So, to start with, the ACA lowered the rate of growth in health insurance premiums. If it had done nothing else, you'd ostensibly still be better off with it. But it did more than that: it also provides Americans with guaranteed-issue insurance, which did not exist previously. What people in general seem not to understand about health insurance rates is that they've been skyrocketing since the early 2000s. Employers have been having uncomfortable conversations about health benefits long before the ACA. More broadly: health insurance isn't expensive because it pays for day-to-day care. Health costs are dominated by chronic illness and inpatient/outpatient procedures, not the overhead of people visiting their GPs. I'm sorry you had an insurance policy you liked that the ACA killed off. But huge numbers of policies, including from health insurance giants, were abusive: they were marketed (effectively!) as real solutions, but had exclusions and coverage caps that made them worth very little if you actually wound up in a situation where you truly needed insurance. We're better off without those policies.
arcticbull 7y ago
> Isn't the whole point of insurance the basic bet that I will need an expensive service so I will make small payments towards that possibility, against the insurer's bet that I will not need that service and will instead be able to keep those payments as a profit? Nope, health insurance isn't insurance because literally everyone will need access to health care at some point in their lives. 100% of us will die of heart disease, cancer, trauma, etc. It's like if we had a 100% chance of houses burning down, we wouldn't call it fire insurance. It's not insurance because it's intended to be consumed, it's a communal pot. Further, no matter what there will be more things wrong with us than resources to deal with it so the other goal besides efficient administration of a health system is rationing access to care. No need to profit here, there's plenty of other ways to make money in the world. All these "the ACA raised my premiums crap" is just that. You didn't have heath insurance before, you had a program that you thought was health insurance but would have absolutely bankrupted the average person if you ever needed to draw on it.
- Stronico 7y ago
  >All these "the ACA raised my premiums crap" is just that. You didn't have heath insurance before, you had a program that you thought was health insurance but would have absolutely bankrupted the average person if you ever needed to draw on it. Why do you say that with certainty? I had a low premium / high deductible plan that was a good fit for me at the time that was both simple and lived up to it's promises, something I have not encountered since.
  - arcticbull 7y ago
    A high deductible plan would bankrupt the average person if they ever needed to draw on it. The average American can't come up with $500 let alone $5000 so for them the high-deductible plan (the only only the could afford) is as good as nothing at all. You're still going to be relying on medicaid. It's not a real health insurance plan because it doesn't cover the realities of every-day life. You're leveraging (literal) survivorship bias in defense of this plan. You could make the same exact case if you didn't have health coverage at all, and nothing happened to you (that it was a good fit for you and it was both simple and lived up to its promises).
basch 7y ago
> it made it far, far more expensive. isn't that the point of insuring uninsured people and ending preexisting condition coverage. if the agreement is "hey we need to cover riskier people because its the right human thing to do" costs are going to go up. thats the trade off. in this case, you being angry that costs went up shouldnt be directed towards government inefficiency. costs ballooned because coverage expanded (and age banding aka community rating, which is similar, agreeing to cap elderly costs and having young people pay. and everyone under 26 being a child, consuming but not paying in.) anyone paying attention going into the aca, knew that costs would go up for healthy people over 26 but not yet retired. (democrats did do _a bit_ of lying about costs going down for everyone and being able to keep existing plans, to get it passed, a fib they admit.) if you are a part of that range, and you voted for the law knowing all this, you were either being compassionate, or hedging that someday you might fall into an uninsured condition situation, or both.
skohan 7y ago
The problem with privatized healthcare is that it's not a problem which market forces will solve naturally. Sure for some things, like elective surgeries (lasik for example) or routine dental care, people can shop around, and prices will reach a sane level. But the majority of healthcare does not work like that. For instance, in the case of lifesaving treatments, the demand is essentially infinite, and this is a fact which Pharmaceutical companies use to raise the cost of treatment to astronomical levels. When the alternative to expensive treatment is death, there is simply no countervailing market force to bring costs down. The same goes for pre-existing conditions. It may have been fine for you and your wife to pay for a reasonably-priced high deductible plan, but without the ACA, that simply would not be an option for a huge number of people. Without government regulation, there is absolutely no incentive for an insurance company to cover a chronically ill or high-risk individual. The rational way to operate that type of business in order to maximize profit would be to cover healthy people only, and remove anyone from your coverage who is likely to file a large claim, and we have seen this come to pass.
- mstratman 7y ago
  > Sure for some things, like elective surgeries (lasik for example) or routine dental care, people can shop around, and prices will reach a sane level. But the majority of healthcare does not work like that. This is precisely because there is no health "insurance" middlemen for purchasing those services. The market drives those costs down. If - like in pre-ww2 America - instead people saved up for the inevitable doctors visits and paid out of pocket directly to the doctors and hospitals, costs would be FAR lower both due to competition and price sensitivity. This is the fundamental problem with using health "insurance" for expected costs, rather than just unpredictable emergencies.
  - skohan 7y ago
    Yes but it is also because those specific types of treatments respond well to market forces: they are common enough for there to be a lot of competing providers, and if the price is too high, people can elect not to receive those services. For a counterexample, look at dental surgery. This is also often not covered by insurance, but it's much more expensive, and low-income individuals often take on debt and risk their financial security to undergo these procedures because the alternative is often a severely degraded quality of life. The difference is that the demand is much less flexible, so providers can get away with higher prices. Many healthcare procedures fall into this category.
remus 7y ago
To nit pick, it's not really a bet from the insurers point of view. The idea is that they operate on a scale where they know the total cost they will have to pay out in any given year is less than what they charge in premiums. The key is operating on a big enough scale that they can forecast their costs accurately enough to be able to set their premiums to always make a profit. With that in mind, from a consumer point of view I prefer to look at it as buying peace of mind rather than betting against the insurer (because in the long term the insurer will always win).
xtracto 7y ago
Insurance is the type of thing that I believe the Blockchain could really solve: Instead of paying a "for profit" company, let's create a set of smart contracts where we can execute the payments (transfers) to a "concentration" account, and when someone needs to cover medical costs, we transfer from that account to the person in need. We can have third-party "evaluators" that anonymously evaluate and guarantee the reality of the medical claim, and let the network approve or reject the claim based on those evaluations.
- athenot 7y ago
  How is that different from a regular single-payer system found in many countries?
  - xtracto 7y ago
    In that it is not managed by the government. I don't have a problem with that (I myself live in a country with socialized medicine), but it seems that a lot of people in the USA don't like the government meddling into some of their business.
- rlpb 7y ago
  That's very easy to suggest. The challenge is to come up with a scheme where individual actors' interests cause their behaviour to be aligned with our goals for the system as a whole. This is extremely hard to do. It isn't at all clear that it's even possible. Merely suggesting it isn't enough; to add something valuable to the discourse, you really need to describe the scheme itself, and that scheme needs to have a credible chance of success.
- amaccuish 7y ago
  > Insurance is the type of thing that I believe the Blockchain could really solve There's always one...
fatbob 7y ago
Amongst other things, the ACA removed the cap on payouts, making them more like actual insurance. What was the maximum lifetime payout on your previous high deductible plan?

decebalus1 7y ago

Exactly. ACA and any other business friendly arrangement proposed by the 'private sector' sponsored democrats (the proverbial 'establishment') will have that effect. Because it still 'stimulates' the business side of things to react in a way that makes it profitable. This should be an all-or-nothing type of deal.

thanatos519 7y ago

The point of health insurance is that nobody should worry about the costs of regular maintenance and emergency service to their meatbag. Ever. As you point out, it costs much more if there is a for-profit organization in the middle. Single-payer tax-funded health insurance means that each person contributes based on their capacity, and nobody has to pay when they receive services. Then the tax collector has an incentive to increase effectiveness of health services by educating and encouraging the population to eat well and exercise daily.

entee 7y ago
You had me until you said the tax collector has an incentive to increase the effectiveness of health services. Currently the largest medical payer in the US is medicare, a government program. It is also one of the most expensive programs the government runs. The government already has this "incentive" and yet we don't seem to be getting healthier nor do people seem to eat better and exercise more. People seem to be getting more obese, not less [1]. I don't know of a single organization or program that has managed to have long-lasting reductions in obesity. Diets routinely fail because people can't maintain them, and exercise by definition is hard so again it's hard to stick to. One fundamental issue is we don't quite understand why people get fat. It's not clear how the basal "fat" set point that everyone has gets set, but it is clear that deviating substantially from that set point is very difficult and that it might shift over time. [1] https://www.stateofobesity.org/obesity-rates-trends-overview/ https://www.stateofobesity.org/obesity-rates-trends-overview...
waterhouse 7y ago
> Then the tax collector has an incentive to increase effectiveness of health services by educating and encouraging the population to eat well and exercise daily. But then the population doesn't have an incentive to follow that education and encouragement—at least not a monetary one. As a comedian said, "You see, I don't have to exercise, because I have health insurance."
James_Henry 7y ago
With the ACA, insurance companies have incentives to encourage the people they cover to take as good of care of themselves as possible more than ever. I think they are currently and in the future will do a better job of that than the tax collector ever will. Especially when it comes to preventable diseases, good health insurance companies are doing some really interesting work on effective behavioral change and early intervention. My insurance for instance pays me to walk every day.
- kevin_thibedeau 7y ago
  They are incentivized to boost their 20% cut. That doesn't work if everyone is too healthy.

tptacek 7y ago

I worry that this is the classical HN analysis: axiomatically derived from premises that seem intuitively true but are empirically false. So, to start with, the ACA lowered the rate of growth in health insurance premiums. If it had done nothing else, you'd ostensibly still be better off with it. But it did more than that: it also provides Americans with guaranteed-issue insurance, which did not exist previously. What people in general seem not to understand about health insurance rates is that they've been skyrocketing since the early 2000s. Employers have been having uncomfortable conversations about health benefits long before the ACA. More broadly: health insurance isn't expensive because it pays for day-to-day care. Health costs are dominated by chronic illness and inpatient/outpatient procedures, not the overhead of people visiting their GPs. I'm sorry you had an insurance policy you liked that the ACA killed off. But huge numbers of policies, including from health insurance giants, were abusive: they were marketed (effectively!) as real solutions, but had exclusions and coverage caps that made them worth very little if you actually wound up in a situation where you truly needed insurance. We're better off without those policies.

arcticbull 7y ago

> Isn't the whole point of insurance the basic bet that I will need an expensive service so I will make small payments towards that possibility, against the insurer's bet that I will not need that service and will instead be able to keep those payments as a profit? Nope, health insurance isn't insurance because literally everyone will need access to health care at some point in their lives. 100% of us will die of heart disease, cancer, trauma, etc. It's like if we had a 100% chance of houses burning down, we wouldn't call it fire insurance. It's not insurance because it's intended to be consumed, it's a communal pot. Further, no matter what there will be more things wrong with us than resources to deal with it so the other goal besides efficient administration of a health system is rationing access to care. No need to profit here, there's plenty of other ways to make money in the world. All these "the ACA raised my premiums crap" is just that. You didn't have heath insurance before, you had a program that you thought was health insurance but would have absolutely bankrupted the average person if you ever needed to draw on it.

Stronico 7y ago
>All these "the ACA raised my premiums crap" is just that. You didn't have heath insurance before, you had a program that you thought was health insurance but would have absolutely bankrupted the average person if you ever needed to draw on it. Why do you say that with certainty? I had a low premium / high deductible plan that was a good fit for me at the time that was both simple and lived up to it's promises, something I have not encountered since.
- arcticbull 7y ago
  A high deductible plan would bankrupt the average person if they ever needed to draw on it. The average American can't come up with $500 let alone $5000 so for them the high-deductible plan (the only only the could afford) is as good as nothing at all. You're still going to be relying on medicaid. It's not a real health insurance plan because it doesn't cover the realities of every-day life. You're leveraging (literal) survivorship bias in defense of this plan. You could make the same exact case if you didn't have health coverage at all, and nothing happened to you (that it was a good fit for you and it was both simple and lived up to its promises).

basch 7y ago

> it made it far, far more expensive. isn't that the point of insuring uninsured people and ending preexisting condition coverage. if the agreement is "hey we need to cover riskier people because its the right human thing to do" costs are going to go up. thats the trade off. in this case, you being angry that costs went up shouldnt be directed towards government inefficiency. costs ballooned because coverage expanded (and age banding aka community rating, which is similar, agreeing to cap elderly costs and having young people pay. and everyone under 26 being a child, consuming but not paying in.) anyone paying attention going into the aca, knew that costs would go up for healthy people over 26 but not yet retired. (democrats did do _a bit_ of lying about costs going down for everyone and being able to keep existing plans, to get it passed, a fib they admit.) if you are a part of that range, and you voted for the law knowing all this, you were either being compassionate, or hedging that someday you might fall into an uninsured condition situation, or both.

skohan 7y ago

The problem with privatized healthcare is that it's not a problem which market forces will solve naturally. Sure for some things, like elective surgeries (lasik for example) or routine dental care, people can shop around, and prices will reach a sane level. But the majority of healthcare does not work like that. For instance, in the case of lifesaving treatments, the demand is essentially infinite, and this is a fact which Pharmaceutical companies use to raise the cost of treatment to astronomical levels. When the alternative to expensive treatment is death, there is simply no countervailing market force to bring costs down. The same goes for pre-existing conditions. It may have been fine for you and your wife to pay for a reasonably-priced high deductible plan, but without the ACA, that simply would not be an option for a huge number of people. Without government regulation, there is absolutely no incentive for an insurance company to cover a chronically ill or high-risk individual. The rational way to operate that type of business in order to maximize profit would be to cover healthy people only, and remove anyone from your coverage who is likely to file a large claim, and we have seen this come to pass.

mstratman 7y ago
> Sure for some things, like elective surgeries (lasik for example) or routine dental care, people can shop around, and prices will reach a sane level. But the majority of healthcare does not work like that. This is precisely because there is no health "insurance" middlemen for purchasing those services. The market drives those costs down. If - like in pre-ww2 America - instead people saved up for the inevitable doctors visits and paid out of pocket directly to the doctors and hospitals, costs would be FAR lower both due to competition and price sensitivity. This is the fundamental problem with using health "insurance" for expected costs, rather than just unpredictable emergencies.
- skohan 7y ago
  Yes but it is also because those specific types of treatments respond well to market forces: they are common enough for there to be a lot of competing providers, and if the price is too high, people can elect not to receive those services. For a counterexample, look at dental surgery. This is also often not covered by insurance, but it's much more expensive, and low-income individuals often take on debt and risk their financial security to undergo these procedures because the alternative is often a severely degraded quality of life. The difference is that the demand is much less flexible, so providers can get away with higher prices. Many healthcare procedures fall into this category.

remus 7y ago

To nit pick, it's not really a bet from the insurers point of view. The idea is that they operate on a scale where they know the total cost they will have to pay out in any given year is less than what they charge in premiums. The key is operating on a big enough scale that they can forecast their costs accurately enough to be able to set their premiums to always make a profit. With that in mind, from a consumer point of view I prefer to look at it as buying peace of mind rather than betting against the insurer (because in the long term the insurer will always win).

xtracto 7y ago

Insurance is the type of thing that I believe the Blockchain could really solve: Instead of paying a "for profit" company, let's create a set of smart contracts where we can execute the payments (transfers) to a "concentration" account, and when someone needs to cover medical costs, we transfer from that account to the person in need. We can have third-party "evaluators" that anonymously evaluate and guarantee the reality of the medical claim, and let the network approve or reject the claim based on those evaluations.

athenot 7y ago
How is that different from a regular single-payer system found in many countries?
- xtracto 7y ago
  In that it is not managed by the government. I don't have a problem with that (I myself live in a country with socialized medicine), but it seems that a lot of people in the USA don't like the government meddling into some of their business.
rlpb 7y ago
That's very easy to suggest. The challenge is to come up with a scheme where individual actors' interests cause their behaviour to be aligned with our goals for the system as a whole. This is extremely hard to do. It isn't at all clear that it's even possible. Merely suggesting it isn't enough; to add something valuable to the discourse, you really need to describe the scheme itself, and that scheme needs to have a credible chance of success.
amaccuish 7y ago
> Insurance is the type of thing that I believe the Blockchain could really solve There's always one...

fatbob 7y ago

Amongst other things, the ACA removed the cap on payouts, making them more like actual insurance. What was the maximum lifetime payout on your previous high deductible plan?