February 26, 2008
I’ve been following (and commenting) on Lazy Man’s latest stab at solving the health insurance issue. This is a topical discussion with all the presidential candidates discussing Universal Health Coverage (the who’s going to pay for it discussion? not so much). In the comments section, people keep going on about how health insurance should be more like auto insurance. If each were a mandated policy and if everyone jumped in to risk pool, then to cost would go down for all of us.
The problem with this hypothesis is there is a tremendous difference between auto and health insurance; how they’re rated and how claims are paid. Some of the differences:
· Claims occurrences and severity are predictable (outside the occasional hurricane).
· Claims data is readily available and useful.
· Claims data is shared between insurers.
· Claims severity is limited to policy limits (hint: don’t offer high limits to high risk drivers).
· Driver’s data is public information and shared between most states.
· If a driver’s violation and accident history goes from good to bad, the insurer can non-renew the policy or adjust rates to fit the new risk.
· Each state maintains a high-risk pool for ‘uninsurable’ drivers.
· Insurer’s rating tables are public information available through each states DOI.
Health insurance:
· Claims occurrences and severity are unpredictable.
· Claims data is enormous and largely useless.
· Claims data is not shared among insurers (HIPPA rules)
· Policy limits on health policies are usually much higher on heath policies.
· Health information is private. Insurers must accept people unscreened (group policies), by stature (Medicare supplement) or rely on field agent cooperation.
· Health policies are guaranteed renewable or subject to HIPPA; no cancelling bad risks.
· Only a few states mandate a high-risk pool.
· Insurer’s rating tables are private information and not readily available.
Add to this the fact that medical treatments changes year to year; new treatments and drugs are developed. Costs associated with treatment go up and down. A busted fender is a busted fender, but treatment for cancer or diabetes is constantly evolving.
I’ve always felt that health insurers are not the drivers of high premiums, it’s the uncontrolled medical costs and a demanding health insurance customer base that makes health insurance premiums astronomical. Am I right or what?
