[The following is part 1 of a two part guest post by Adfecto from Aspire 2 Wealth. He left a great comment on this subject. Though I initially disagreed with him, he made some great points. He was kind enough to consolidate many of those thoughts into two posts. If you like this article, consider subscribing to his RSS feed.]
A great deal of buzz has been generated lately about the idea of making people who are unhealthy pay more for health insurance. Most people's knee jerk reaction when they hear about this idea is that, "of course unhealthy people should pay more." It seems only fair that those who burden the system pay their fair share, right?
I'm here to tell you that it isn't that simple. Your intuition has betrayed you, and in fact it is a terrible idea to charge different rates in this manner. Now, quickly before everyone quits reading, I want to pose a few questions that hopefully will encourage you to keep reading.
1. How do you decide who is unhealthy?
2. Who decides if someone is unhealthy?
3. How much extra should someone pay if they are unhealthy? 10%, 20%, 200%?
4. Where do we draw the line? If you are very unhealthy should you no longer qualify for any insurance?
5. Does it matter why you are unhealthy? What if a person was unlucky? What if a person was born unhealthy?
6. Why should unhealthy people pay more? Do unhealthy people really cost more to insure?
This is a lot to tackle in a single blog post, but my goal is to get everyone thinking. In the interest of full disclosure, I am overweight (but not morbidly so) and my wife has asthma. It is very likely that we may be the type of people others would want to single out for higher rates. That said, I think my arguments are not based solely on my bias against paying more for insurance.
Now to answer some of the questions: The obvious starting place is to break the population down into groups based on their health. Research has shown that certain groups of people are more susceptible to disease than others. First on the list are smokers and the obese. Smokers have been shown to be more likely to get cancer and obese people are more likely to have high blood pressure, heart attacks, or suffer a stroke. These are all expensive conditions to treat, and can be identified by simple screening.
My problem is this, even if you could define some characteristics that made a person "unhealthy," you are still missing out on a lot of people who are equally unhealthy but don't fit your metric. What about the skinny people who don't eat any fruits or veggies? What about the fat people who regularly exercise? What about the people who work with radiation or carcinogens in their occupation? Which children grew up in homes with lead paint? Which people have seven close family members who have died of heart disease? The point is that creating an objective metric that encapsulates all of the genetic, environmental, and lifestyle factors that truly determine our level of health is not possible. To boil this complexity down to five or ten multiple choice questions would punitively affect many people who are healthy and miss many people who are unhealthy.
Now playing devil's advocate for a moment, let us consider that we have indeed found our voodoo methodology to classify a person's health or 'un-health.' I am sure an actuary could create a formula to determine exactly how much people in each category of health should pay, but recognize that number would be based on an imperfect model of disease and medicine. Based on some hypothetical model, a smoker may be charged 20% more on average for health insurance. That seems fair. Maybe the person who has high blood pressure is assigned to pay 10% more on average for health insurance. Again it may be in the right ball park. However, it is naÃ¯ve to think that we understand our health so well that a mathematical formula can sum it all up, down to a dollar amount.
Now, what about the person who has Type I (childhood) Diabetes. This is a lifelong condition that requires all manner of treatments and medications. If the actuary comes back and says 50% or 100% more for health insurance, is that 'fair' or reasonable. This condition does not have anything to do with behavior, but it does cost an awful lot to treat. Now, what if an adult is diagnosed with diabetes, should it matter if it is Type II (somewhat based on lifestyle) or if it is late onset Type I? What if it is misdiagnosed? Finally, what if the disease is AIDS? Would it matter how it was contracted? Should that person pay double for health insurance? I would answer that it should not matter. We should all pay the same.
Move on to read part 2.
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