[This is my response to a two-part guest post by Adfecto of Aspire 2 Wealth. You might want to read both part 1 and part 2 before continuing. The topic is controversial and as I imagined it drew many strong feelings from commenters]
I’d like to address a few of the main points that Adfecto made in the two articles.
Who determines unhealthy people and how? If we decide they should pay pay extra, how much?
I think Adfecto answered these questions later on… “an actuary could create a formula.” He is quick to point out that it would be based on “an imperfect model of disease and medicine.” I’m fine with an imperfect model. I don’t think that any insurance is a perfect science. If you look at car insurance rates and credit scores these are attempts to quantify based one what we do know about the facts. It doesn’t have to be perfect to be very effective. However, the most obvious parallel to me is life insurance. Don’t actuaries for these companies quantify health and life expectancy already?
Could you get kicked out of the your life insurance?
I don’t think anyone should be completely uninsurable. This would be a place for politicians to step in and make sure that everyone is insurable and that there’s a reasonable cap on rates. Even if someone was born with something that costs millions, it should be subsidized by higher rates for the healthy people. So even you are the most unhealthy person in the US, perhaps you pay only 20% more than the most healthy group.
What if you were genetically predisposed to being unhealthy?
I think there are few people born into perfect genetic health. My wife has high cholesterol. My family has a history of a rare genetic thyroid cancer – which I might have. I’m okay with having to pay on the unhealthy spectrum if a test determines that I do have the genetic trait.
Do unhealthy people really cost more to insure?
After reading the block of comments and articles, I still say yes. If some people die of heart attacks right away and their cost is zero, that’s great. However, a significant number do live and need treatment. The best way to save money on health care is to not need it. There was an argument about living longer requiring people to require more treatment, but they are paying health insurance premiums over this longer life.
A frequent commenter, Kitty, asked for real evidence that it costs more to treat the unhealthy. I think that was a great point. However, can’t I turn it around and say, “Where is the evidence that it costs the exact same amount for each person’s cost of health medicine and procedures?” I think you have to look at all the studies and see what conclusion is most likely. It seems like there are a few studies that say it’s cheaper to be unhealthy and many more that go into the expensive costs of chronic diseases. One great example was that runners may require knee replacements. I’d counter that with obese people needing knee replacements (my father-in-law had the procedure after years of carrying his 300 pounds, for example). It may turn out that it balances out and the runner is left with a healthier heart due to his/her fit condition.
Another couple of people (Brandon and Writer’s Coin) noted that there should be discounts for people who make healthy lifestyle choices. My problem with this is that it’s the same as taxing the unhealthy – it just depends on the view. By giving a discount to those who are more healthy, the unhealthy are paying more than the average person.
A Two-Tiered Proposal
I mentioned above that health could be quantified to the best our abilities. That number could be used to determine where on the health spectrum you fall. If you were more unhealthy than the average number, you would pay a percentage more. If you were more healthy, you’d get a discount. I proposed the number to be capped at 20% earlier, but I don’t know if it’s the right number. I’m just giving an idea, not an exact implementation.
The other idea is that I would “tax” people at the source. There is already a significantly high cigarette tax, but I’m not convinced every penny of that money is going directly toward stopping people from smoking or towards curing lung cancer. Step one would be make that happen. At some price the cost of the cigarettes pays for the health care of the person smoking.
I would add a fat tax for foods that prove to be unhealthy. If high-fructose corn syrup and trans-fats are cheap, there should be a tax on them to pay for obesity related problems they cause vs. natural alternatives. Here’s an example of a broken system, it can cost $5 for a salad at McDonalds while a double cheeseburger is just one dollar. To encourage people to make healthier choices shouldn’t the salad be closer to $1.50 and the double cheeseburger $3.50? I’m usually against the government stepping in, but I can’t see a better solution.
Perhaps in the future people can opt-in to a program that measures how much exercise they get and could get a discount based on that. Perhaps the treadmill stores workouts on a smart card. The only problem is that it would be hard to measure everyone’s preferred exercise – I don’t know how to measuring distance swam for example. However, it’s an idea even if it’s not quite practical now.
Maybe I miss the point with this two-tiered proposal. Adfecto correctly points out that “insurance is suppose to spread risk and keep health care expenses predictable and manageable for everyone” while I’m looking at it as a way to motivate us to be more healthy. I think that my proposal does both, while everyone paying the same only makes it “predictable and manageable” for everyone.