5 ms·
From the perspective of "European" insurance... this is what you get if you let unbridled adverse selection into your market(s). Health insurance is perfectly m
by wjnc 2y ago
From the perspective of "European" insurance... this is what you get if you let unbridled adverse selection into your market(s). Health insurance is perfectly manageable (if and only?) if you accept (some) mandatory coverage. Otherwise the market will unravel. Same for other types of coverage with medical acceptance (life, disability). Once you start on that treadmill, you will lose large parts of the market where the product / coverage would actually be most benificial in terms of utility. You do need some way of making the product work both ways (could be long term contracts, prohibition on using certain types of information, ...).
Example: My firms has a niche. It turns what usually is an individual disability product (where you have to have extensive medical checks up front to deal with adverse selection), into a product sold to employers for most or all employees at once (that is the key). Yes, in my country disability is a subject that employers and unions actually talk about in collective bargaining. That pretty small change takes away the adverse selection. It makes the average claim manageable, it shares burdens and keeps pricing acceptable. We are even experimenting with blank acceptance for employees who opted-out earlier. That's tricky since that brings back the adverse selection on the individual level. Still learning about how to reduce that effect, while keeping our product affordable and manageable.
- gruez 2y ago>Health insurance is perfectly manageable (if and only?) if you accept (some) mandatory coverage. Otherwise the market will unravel. Isn't that what obamacare was supposed to solve by making health insurance "mandatory"?
- nemomarx 2y agoI think it ended up having too much variability in coverage, so like car insurance everyone gets pretty cheap plans? mandatory medicare would have a very wide risk pool in comparison right
- telgareith 2y agoBasically.
- reverius42 2y agoYes, but the republicans got rid of most of the mandatory part.
- tomp 2y agowe should just stop calling it insurance, and call it socialised medicine the young pay for the old "insurance" means there's some chance you're having an adverse event, and a lot of chance you don't but with medicine, (almost) all of us will get old, and require tons of it
- teeray 2y ago> "insurance" means there's some chance you're having an adverse event, and a lot of chance you don't Exactly. Classic insurance is a bet: the insured is betting that something bad will happen (e.g. house burns down), and the insurer is betting that it will be fine. The problem with health insurance is that the insured will always be correct eventually. The model fundamentally doesn’t work, except if you adjust the parameters of timescale, population, etc. (which tends to be grossly discriminatory except for voluntary behaviors like smoking).
- wjnc 2y agoI disagree. Insurance isn’t a bet. Bets are zero sum (or worse). Insurance isn’t zero sum. It’s a structured redistribution of risk bringing both an improved expected utility (if we assume risk aversion) And expected profits to the risk takers. (The funny economist would argue that a casino is the same if we assume the opposite of risk aversion (tolerance / seeking)). I agree with the point that for high chance, low impact events insurance is less efficient. Follows from the same basic utility theory. Insurance is not costless and costs will start to dominate benefits. The intergenerational aspects of health insurance are a good point. Inflation and medical-technological progress still make insurance a good solution in my book. You can save for a pension (still looking at most of the Western world for saving too little); it’s harder to save for unknown future costs whose height is dependent on where the medical risk falls.
- wjnc 2y agoPeople pay for each other all the time? The old pay the tuition of the young. (Well, not in the US.) Older people pay way more income and wealth tax. Via that logic any re-distribution leads to the conclusion of socialization? I cannot argue pro insurance with Milton Freedman or proper libertarians. (And even have my share of attraction to that part of the spectrum of political philosophy.) I can point out that insurance that works is a staple in large parts of the capitalist world, and has been for some 4 centuries.