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I don't know if what I am saying contradicts you, but health insurance certainly can serve a rational purpose even if everyone that bought it was young and heal
by sopooneo 15y ago
I don't know if what I am saying contradicts you, but health insurance certainly can serve a rational purpose even if everyone that bought it was young and healthy. You premium simply needs to cover the average cost per subscriber plus some profit for the provider. It can (and possible should) also function the way you describe with the lower cost subscriber subsidizing the cost of the higher cost subscribers. But that is not an inherent part of insurance.
- georgefox 15y agoAgreed, that's a huge part of health insurance, and that's why I would never consider dropping coverage. But in practice, wouldn't health insurance almost have to subsidize the expenses of high-cost folks at the expense of low-cost folks? Actuarially, you'd have to manage to get exactly the average cost from each subscriber (plus an equal or proportional amount of profit) in order for that not to happen. Now I'm assuming you're strictly talking about health insurance (though the same concept applies to homeowner's insurance, etc.), but isn't subsidizing high-risk/high-cost subscribers inherent in some forms of insurance? Take a pension, for example. Some people will live much longer than expected; some will die a year after they retire. The only way to account for this, other than periodically adjusting each retiree's income based on how unhealthy they are, is to pay for the pension of one ancient retiree with the funds from one who died young.