The problem is that unhealthy lifestyles (drinking, smoking, fast food, &c) are disproportionately found among the lower socioeconomic strata, creating yet another penalty for being poor.
If they perfectly assess risk, your annual premium will just be your annual cost plus all of the administrative costs of insurance, so just self-insure. We're getting closer and closer to that, further eliminating any value that anyone gets from insurance.
I think what you're trying to say is that the aggregate risk remains the same under mandatory coverage, put that's going to be true no matter what and the effects of this risk can be optimally spread through insurance.
As an example, say $180 billion dollars worth of damage is done to 1 million homes in the US through natural disasters every year. With 300 million people in the US, mandated insurance would have everyone pay $600 a year to cover these damages. No insurance would mean you paid nothing unless your house was affected, at which point you lost on average $180,000. Insurance exists to pool the risks of these life-destroying events.
Insurance definitely isn't going away, in fact our capability to insure against a wide variety of events is in its infancy. The insurance market will only get more and more sophisticated. Hank Greenberg has some interesting thoughts on the direction of the industry.
Let's talk outcomes and efficiency, and not pretend charging doctors $39 to file "insurance" paperwork is anywhere close to optimal.
And, yes, aggregate risk for people will not change, as we, unlike our tools (e.g. a house), are only at equilibrium when we are dead.
Insurance companies that can better predict customer risk outcompete those that don't. They can charge less for lower-risk customers and still make a profit, thus drawing them away from their competitors and leaving their competitors with higher risk people who pay too little.
Yet, the end game is that everyone can predict risk so thoroughly that insurance is pointless.
It's ultimately a weird, backwards Tragedy of the Commons, and various non-discrimination laws are sort of the regulatory response to it.
Only, those don't help, if people know how high their own risks are and if they can still decide whether to sign on.
Not true. Suppose you have a 0.01% chance of needing a $10M treatment in your lifetime. First of all you can't say, "Oh I'll just self insure" because few people have $10M. Second, you may decide that paying $10,000 over the course of your lifetime is preferable to risking a payment of $10M.
Removing uncertainty doesn't eliminate the need for insurance, it just reduces the opportunity for risky subscribers to socialize their risk, and for insurance companies to reap gross profit.
In the first, the insurance company would know, with certainty, who falls into that 0.01% category, and charge them $10m for insurance in their lifetime.
In the second, the insurance company, with certainty, would know what year the treatment is needed, and charge a $10m premium for that year only.
Insurance companies are identifying things like "Driving at night increases risk of accident". They are nowhere close to, "A blue corvette driven by a 43 year old male will rear-end a ford pinto today"
Those with above average current and past health status should enrol into the very least amount of insurance they can get away with.
If they perfectly assess risk, your annual premium will just be your annual cost plus all of the administrative costs of insurance
The idea of insurance is pooling risk. So if you're perfectly healthy you are in essence paying for other people's treatment.
However, if you happen to run into very expensive health issues it's you that profits from the premiums of other people.
If insurance works as you describe it it wouldn't make sense at all and everybody would individually be responsible for her entire medical cost. With partially ruinous consequences for the individual.
I think that's his point.
We are never going to reach a point where we can accurately predict whether someone will be hit by a bus or shot.
And better at real-time charging and paying for insurance in micro-increments. Predicting over the course of a year is hard, over the next microsecond, not so much.
Going to the gun range? Your insurance premium just went up by $6/hour. Speed in your car? Slam on your brakes suddenly? Driving quickly in heavy traffic? Drive at 3AM on Saturdays?
A single-payer system would have similar incentives (in the form of cost reduction) to do the same.
Vanderbilt University economist Kip Viscusi claims a net cost savings of 32 cents per pack sold [1]. It seems we're all going to die, and Alzheimer's isn't part of the quick and easy way out of healthcare cost. And at the ripe age of 125 or so, 100% suffer cancer.
1. http://usatoday30.usatoday.com/news/health/2009-04-08-fda-to...
See, for example, http://aje.oxfordjournals.org/content/155/8/732.full
for the negative correlation between smoking and Parkinson's disease, and
http://ajcn.nutrition.org/content/87/4/801.full
for some insights into the negative correlation between smoking and obesity.
Not to say that smoking is a good idea, it's not (actuarial data are clear on that), but your view of its consequences is inaccurate.
That said, I'm not opposed to smokers paying higher premiums — but that practice already exists, based on policyholder disclosure, or rescission in the event of fraud. (I say that as a former smoker, who did disclose my habit, and paid a substantially higher premium because of it.) We don't need carriers trolling through peoples' transaction history to dredge up every possible excuse for hiking premiums, because that's exactly what they'll do.
Yes, it's true that sometimes you can find healthy stuff for relatively cheap. It's also true that you cannot do it consistently, in order to "eat cheap" in a consistent manner, it means constantly hunting for those deals, which implies trading your time for money. This is something the poor do a lot of, sitting at a laundromat instead of just throwing clothes in a washer, for example.
And I don't want to hear about eating some form of beans 5 days/week, eating healthy implies variety.
It can occassionally be done as cheaply as eating unhealthily, but not consistently over time. Your food bill will go up.
> And I don't want to hear about eating some form of beans 5 days/week, eating healthy implies variety.
Vegetables can be pretty cheap, if you stick to what's in season. Beans are a good start, add lentils, potatoes, carrots, etc. Offal makes for cheap protein (but is not to everyone's taste).
As cheap as eating unhealthily? no.
Stress is usually self-inflicted. There are good reasons to subject yourself to stress, and there are bad reasons.
If you're suggesting that an annual physical exam is the risk mitigation equivalent of a car alarm, then GEICO should have eaten the extra cost for purchasing a car with one installed instead of charging a lower premium because you have one.
I mean, insurance doesn’t cover everything, obviously, but that mostly applies to nice to have things or aesthetic things that aren’t really necessary (e.g. root canal treatment for wisdom teeth is not covered – pulling wisdom teeth if the caries is causing problems that can’t be solved with fillings anymore is, glasses are not covered, etc.).
This is coming from somebody who was raised in a very poor family so it's got nothing to do with not caring about poverty. It's just these sort of liberal ideas you could hear at an occupy protest show zero understanding of economics and are basically just bitching about companies.
Nobody ever said it was their fault.