Friday Rant: Health Insurance Risk / Premiums – Level Playing Field or Grand Canyon?

This week's New York Times reported that "Women still pay more than men for the same health insurance coverage...." In many cases a lot more, but the disparity doesn't involve maternity coverage -- though that remains an extremely expensive option.

If the new health care law (popularly known as the Affordable Healthcare Act and Obamacare) -- likely contingent upon legal challenges and the future political landscape -- takes effect in 2014 as scheduled, "any health program or activity" will be broadly prohibited from discrimination by gender. "But for now the price disparities continue," the story continues. "Indeed, nonsmoking women often pay more than male smokers of the same age for the same coverage," the Times notes.

The provision of health insurance by private carriers in the U.S. is a for profit financial industry like auto insurance, life insurance, property insurance and so on. Insurance also carries a degree of public good in that we are all better off when our fellow citizen's lives are not decimated by loss. And in the case of health insurance, the healthier we all are, the higher our productivity and aggregate quality of life. But why should everyone's risk quotient -- if you will, in a pool of insured individuals -- be averaged together so that everyone pays the same premium for variable consumption of benefits?

Don't we expect and believe we're entitled to pay less for life insurance if we don't smoke, are physically fit, and maintain a healthy life style. Similarly, why shouldn't I pay higher premiums for a $300K term life policy at age 60 than a policy holder who is 35. I also have a flawless driving record and pay far lower auto insurance premiums than if I'd had speeding tickets, a DUI, or fender benders.

Insurance risk and rates have always been calculated according to actuarial risk assessments that are transparent and subject to regulatory scrutiny. Why then should health insurance and the risk assessed premiums applied via multiple factors be considered discrimination? And why should healthy individuals pay higher premiums in a shared risk pool with others who will actuarially consume a higher benefit cost?

Admittedly, I'm playing devil's advocate to an extent here, and honestly, I don't understand why women are actuarally deemed less healthy than men. I selfishly and compassionately want everyone to have access to affordable healthcare and want to live in a society where everyone is as healthy as they can possibly be. But it's obfuscating, disingenuous and absurd to not acknowledge the legitimacy of variable risk and resultant assessed insurance premiums.

If you were insuring a named supplier facility in a flood or hurricane/tsunami zone compared to one in a less volatile area, you'd pay a higher premium. As you would an individual with known ailments, or worse, self-inflicted conditions (e.g., diabetes due to diet or obesity) in the case of health insurance. The irony, of course, is in the former situation, such a decision based on risk factors is a rationale business decision. But in the latter case, it will be discrimination, based on the health-care legislation about to take effect.

- William Busch

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Voices (6)

  1. Erica:

    The issue is not that woman are less healthy, it’s that women use medical services more often than men. Personally I think it’s wildly unfair to men to have women’s premiums be the same when women are going to get the lion’s share of the use out of it, and I’m female.

  2. bitter and twisted:

    So, Billy: the choice is – pay more for insurance, or pay more tax to subsidize the uninsurables.

  3. William Busch:

    TBD. But when "rate discrimination" is prohibited, it would appear that those who now pay more will pay less and those who now pay less will pay more. Which is really a prohibition on individual risk assessment.

  4. William Busch:

    Bitter and twisted,
    Unfortunate people who are so ill and poor that health insurance is economically unfeasible must clearly be subvented by special programs and government assistance as they are now.

  5. bitter and twisted:

    You want access to healthcare for all: so what is your solution to those who through no fault of their own are not economically insurable?

    Whats wrong with everyone paying a bit more ?

  6. Jeremy Engdahl-Johnson:

    How will changes to age- and gender-rating under healthcare reform affect insurance rates?

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