Shocker: Insurance Companies Actually Insuring
In Fisking a Collectivist Approach to Healthcare I rebutted the absurdity that insurance companies "avoid people who actually may require healthcare." I said, "Insurance companies want to insure...[and] have no incentive to avoid you if they can price your risk properly." Turns out, I was right.
Here is an illuminating article about how a few insurance companies are finding success in selling cheap policies to the young and healthy. The business that companies like WellPoint are generating explodes the myth that the private insurance market can't adjust their business models. An additional myth that this story explodes is that the 'uninsured' are hopeless destitutes who need help. A large percentage of the uninsured are young healthy people who don't see the need for insurance, especially premium, high-priced coverage. They'd rather have the money for doing what young people do (when I was 27, I passed on health insurance to have more disposable income in which to seek out the future Mrs. Baseball). But give these folks a stripped down product (let's face it, a 28 year old has an extremely low probability of needing a hip replacement, so why should he/she pay for expensive insurance that covers hip replacements?) at low cost, and they buy insurance. Unbelievable. Market demand met by market supply.
Still, there are the same type of people who view this as skimming the insurance pool, much as they view school vouchers as skimming the educational pool. That argument is just plain dumb. Healthy young people are still contributing to the insurance pool that pays for sick people, it is just that they are paying for sick people in the future. As I have said before, people who are sick today are a very small and special category and should be the beneficiaries of government assistance. We can afford this easily without having to distort the private market, which we've done. Insisting that the young and healthy today fund the care of the old and sick today, we remove the incentives to get and stay healthy and we drive needed people out of the insurance pool altogether with expensive insurance that they don't want. This Bloomberg article chronicles a welcome development, one that policymakers ought to find ways to encourage and expand in the least intrusive and distortionary way.
This post is going up on the Healthcare Clearinghouse.
Here is an illuminating article about how a few insurance companies are finding success in selling cheap policies to the young and healthy. The business that companies like WellPoint are generating explodes the myth that the private insurance market can't adjust their business models. An additional myth that this story explodes is that the 'uninsured' are hopeless destitutes who need help. A large percentage of the uninsured are young healthy people who don't see the need for insurance, especially premium, high-priced coverage. They'd rather have the money for doing what young people do (when I was 27, I passed on health insurance to have more disposable income in which to seek out the future Mrs. Baseball). But give these folks a stripped down product (let's face it, a 28 year old has an extremely low probability of needing a hip replacement, so why should he/she pay for expensive insurance that covers hip replacements?) at low cost, and they buy insurance. Unbelievable. Market demand met by market supply.
Still, there are the same type of people who view this as skimming the insurance pool, much as they view school vouchers as skimming the educational pool. That argument is just plain dumb. Healthy young people are still contributing to the insurance pool that pays for sick people, it is just that they are paying for sick people in the future. As I have said before, people who are sick today are a very small and special category and should be the beneficiaries of government assistance. We can afford this easily without having to distort the private market, which we've done. Insisting that the young and healthy today fund the care of the old and sick today, we remove the incentives to get and stay healthy and we drive needed people out of the insurance pool altogether with expensive insurance that they don't want. This Bloomberg article chronicles a welcome development, one that policymakers ought to find ways to encourage and expand in the least intrusive and distortionary way.
This post is going up on the Healthcare Clearinghouse.
posted by Donny Baseball at 10:48 AM
2 Comments:
I'm not certain the notional approach is working. I may draw some graphs and post them to make it more clear (for my audience). What I assume:
Supply is inelastic and to the left. Even in the long run it's not perfectly elastic (as we'd assume) because capacity is so hard to obtain (long run of about 5-10 yrs.)
Demand is spuriously shifted right because marginal cost pricing isn't performed.
Socialized medicine will exacerbate, rather than solve that problem.
I think I'll spend some time in the a.m. looking in journals to verify the assumptions before I post though.
I wouldn't assume that supply is so inelastic. Alot of healthcare could be provided by practitioners without a full medical degree and years of internships. Certain care requires only low level, specialized knowledge - like a physical therapist.
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