Lower Health Care Costs by Basing Premiums on Habits

[Scott]

In my recent philosophy of politics article, Ways to Lowering Health Care Costs, I explained my top 5 suggestions. Please use this thread to specifically discuss the third suggestion about basing insurance premiums on habits.

Do you agree that it is fairer to charge higher premiums to people who voluntarily engage in unhealthy behavior such as smoking cigarettes or overeating? Do you agree that it would lower health care costs?

What other activities besides those that I listed would you want to see lead to higher premiums being charged for people who engage in them?

Thanks!
Scott

Just as car insurance companies drive more based on how much you drive, and home insurance companies drive more based on how close you are to flood/fire/earthquake zones, so health insurance companies must charge based on how much of a "risk" you pose.

How else would you all have it? You must pay an increased rate if you are more likely to use the insurance at an increased rate. How is this difficult to comprehend? Can somebody explain to me why private companies are demonized for embracing this concept, and yet governments are not?

[Scott]

Just as car insurance companies drive more based on how much you drive, and home insurance companies drive more based on how close you are to flood/fire/earthquake zones, so health insurance companies must charge based on how much of a "risk" you pose.

How else would you all have it? You must pay an increased rate if you are more likely to use the insurance at an increased rate. How is this difficult to comprehend? Can somebody explain to me why private companies are demonized for embracing this concept, and yet governments are not?

Exactly. So you agree, right?

Unfortunately, as explained in the article, often people are charged the same rate for health insurance regardless of they engage in habits that will make them more of risk, i.e. more costly to cover. I wish the insurance rates of any given person tended to more often be more impacted by how much the person engages in unhealthy habits like smoking cigarettes. Anecdotally, when I had health insurance, I was never asked whether or not I smoked cigarettes, whether I was an obese over-eater, or so forth. I wish they had. I believe it would clearly lower the total health care costs.

Scott,

I'm actually licensed in the State of California to sell insurance, and I can guarantee you that the companies that I have sold for in the past most definately ask those questions.

In fact, if people lie on the applications, all treatments that can be traced to conditions DIRECTLY related to things they lied about [smoking, drinking, etc.] will either be outright denied [charged to the individual; how's that for a penalty] or severely limited in scope.

I think it's beyond fair, and am in full agreement with you. And yet, no government interference is necessary. In fact, I know for certain that Insurance companies HAD TO FIGHT TO KEEP THESE POLICIES IN PLACE.

The State of California attempted to call these questions "discriminatory" at one point in the past, and under the 'public option', all pre-existing conditions must be accepted WITHOUT "penalty" to the insured.

Can you please explain to me how any insurance organization can remain solvent while embracing these asinine principles?

[Scott]

I'm actually licensed in the State of California to sell insurance, and I can guarantee you that the companies that I have sold for in the past most definitely ask those questions.

I'm glad to hear it. I hope more companies do that. I assume it is more common for companies to ask those questions when individuals apply on their own to get coverage. When large groups apply as a group, namely through an employer, I don't think these questions are usually asked.

As for what the governments can do, they could change the health insurance plan bought by their employees to be one that asks these types of questions (e.g. do you smoke cigarettes, are you obese, do you eat fast food, etc.). As far as I know, state employees usually pay a set amount for their health care regardless of their habits. Though I want big businesses to also choose these types of fair plans for their employees, I wouldn't want the government to tell businesses which plans to buy. But the government of course chooses which plans it offers its own employees. And as we agree, choosing to offer plans that charge a higher rate to individuals in the group who voluntarily engage in unhealthy cost-increasing habits will discourage those habits and lower the total health care costs.

The State of California attempted to call these questions "discriminatory" at one point in the past, and under the 'public option', all pre-existing conditions must be accepted WITHOUT "penalty" to the insured.

Can you please explain to me how any insurance organization can remain solvent while embracing these asinine principles?

That's a requirement in some of the health care bills, some of which also happen to call for a public option. But as I understand it these are two separate proposals. One requires insurers to accept pre-existing conditions without penalty and is also present in bills that do not have a public option. The other is the public option proposal, which I believe could be enacted without requiring companies to accept pre-existing conditions.

Unless there is a health insurance mandate requiring all individuals to get coverage, I do not see myself supporting a law that requires all health insurance companies to accept involuntary pre-existing conditions without penalty. Either way, it's irrelevant to the main issue of this thread, which is the idea of charging people higher premiums if they engage in unhealthy behaviors, thus financially discouraging unhealthy behavior, which then leads to lower total health care costs.

The State of California attempted to call these questions "discriminatory" at one point in the past, and under the 'public option', all pre-existing conditions must be accepted WITHOUT "penalty" to the insured.

Can you please explain to me how any insurance organization can remain solvent while embracing these asinine principles?

Unless there is a health insurance mandate requiring all individuals to get coverage, I do not see myself supporting a law that requires all health insurance companies to accept involuntary pre-existing conditions without penalty. Either way, it's irrelevant to the main issue of this thread, which is the idea of charging people higher premiums if they engage in unhealthy behaviors, thus financially discouraging unhealthy behavior, which then leads to lower total health care costs.

Scott,

I believe it's relevant because this is the "Politics" forum, and we're ultimately discussing [although rather removed from this particular threads' focus] Government intervention into a private sector. My point is that the Government does not, and never has had to enforce this principle.

So while it's obvious to both of us that higher rates for unhealthy individuals are necessary for properly rating insurance risks, it should be apparent that this is totally irrelevant to "Politics" in general.

How do we know if a person is overweight? How can we know by how much a person is overweight so as to have a sliding tax scale determined by excess pounds? We would create gevernment standards equal for all.

I propose Weigh Stations, one for men and one for women similar to the weigh stations used by trucks.

http://science.howstuffworks.com/question626.htm

A woman would visit her weigh station once a month and she would enter a room where she would be weighed to determine both her gross weight and the weight of her parts so she could be assigned the means to work on offending parts. For reason of fairness, the weigh station would be the same for all with impartial weigh masters to assure equality. At the end of the year the results of her twelve visits to the common weigh station would be averaged out and she would receive a tax form that would determine the amount owed on her federal return.

[Scott]

The State of California attempted to call these questions "discriminatory" at one point in the past, and under the 'public option', all pre-existing conditions must be accepted WITHOUT "penalty" to the insured.

Can you please explain to me how any insurance organization can remain solvent while embracing these asinine principles?

Unless there is a health insurance mandate requiring all individuals to get coverage, I do not see myself supporting a law that requires all health insurance companies to accept involuntary pre-existing conditions without penalty. Either way, it's irrelevant to the main issue of this thread, which is the idea of charging people higher premiums if they engage in unhealthy behaviors, thus financially discouraging unhealthy behavior, which then leads to lower total health care costs.

Scott,

I believe it's relevant because this is the "Politics" forum, and we're ultimately discussing [although rather removed from this particular threads' focus] Government intervention into a private sector. My point is that the Government does not, and never has had to enforce this principle.

I'm sorry. I think I wasn't being clear. I wasn't saying that you bringing up government intervention (specifically the lack of need for government intervention) was irrelevant. I am saying that the issue of whether or not people are charged for involuntary pre-existing conditions (i.e. someone having a disability, disease or ailment through no fault of their own) is irrelevant because it would not lower costs. (Granted, I agree with you in that I do not want the government to force private companies to insure people with involuntary pre-existing conditions with no extra charge.) I just didn't want to confuse that topic with the topic of lowering costs.

Charging people more for voluntary conditions--e.g. smoking and the unhealthiness caused by it--would lower costs by discouraging the cost-increasing behavior.

I agree with you that I do not think government intervention is needed to force companies to charge people more for engaging in unhealthy habits like smoking. That's a relevant point and a good point, and I'm glad you made it. The only government action needed on this particular issue is to use such habit-based programs when it offers private insurance to its employees, as opposed to buying a private plan that charges the same premium to all individuals regardless of their habits.

The people most capable of enacting the suggestion of this thread would be health insurance companies (both profit and non-profit) who can start charging more to people who engage in unhealthy habits such as smoking or overeating. And the other people are consumers who can choose to buy insurance from such companies. Though healthy people may not care much about the little money they would save from having their healthy habits factored into their premiums, I think health care activists would be wise to boycott insurance plans that do not factor it in as a matter of principle. (Unfortunately, I think many activists and many politicians who claim they want to lower costs actually have other goals and motives.)

How do we know if a person is overweight? How can we know by how much a person is overweight so as to have a sliding tax scale determined by excess pounds?

It's not a tax I'm suggesting (in this thread) but rather a higher premium to be charged by the private insurer. The most obvious way for an insurer to find out if a person smokes or is overweight or so forth is to ask when the person applies for insurance or applies to renew it. Also, like with all types of insurance, fraud needs to be fought criminally and civilly.

Scott,

The great thing about private insurance companies is that fraud doesn't need to be litigated!

If you lie on your application, you lose coverage for your condition, or altogether. It's much more simple to deter people from unwanted behavior with the threat of removing their coverage than it is to threaten them with "possible" penalties or jail time.

I'm sure most people don't expect to be penalized even when this disclaimer is provided, especially considering the dismal state of our judicial system.

This only goes to further show the BENEFIT OF PRIVATE MARKET INSURANCE.

Government regulation of private industry in a free-market economy is an impediment to progress in this and most other social issues.