Say insurers know nothing about customers, just an anonymous number. In this world they would have to charge everyone the same, the average cost of insuring a person. Everyone pays the same premium, and has all their medical bills paid.
In a parallel world, insurers have perfect information. They know your medical future, not just the history. In this world, insurers will price your premium at exactly the cost of paying your medical costs. If you won't have to go to the doctor this year (this is a world where insurers know the future), you won't be charged anything. If you're going to be in a car accident, you will be charged for surgery and rehab.
In world no. 2 where insurers have maximum knowledge, insurance basically doesn't exist. Insurance is exactly the same as just paying your bills directly. In world 1, insurance works fine, but a 19 y/o pays a little more than they do today and sick or elderly people pay less than in the real world.
As data/information becomes more ubiquitous, we travel down this continuum.
Call me cynical but in practice I think that kind of asymmetric information is only going to serve the insurer to rake in bigger benefits.
The real world scenario is that a combination of better startistics/ML, and access to a lot more data moves us increasingly closer to that world where medical insurance doesn't make any sense. Insurance works for unknown/unknowable situations.
Spontaneous combustion insurance is cheap because it could happen to anyone.
I disagree. The “the lucky should share in the costs of the unlucky” aspect of insurance still is there; the difference is that, in a perfect information world with self-serving individuals, the need still is there for the unlucky, but the lucky won’t be willing to take part.
In that system everyone who pays the insurance would be better off putting the money aside as they wouldn't have to pay for the admin overhead.
Even if the catastrophic event happens early in the timeline it would probably be better to take out a loan than to pay the insurance.
The pricing game is between the insurance companies and the providers; the end recipients of services have no involvement in the decision making process.
Its kind of like cattle, veterinarians, and ranchers. The cattle don't have much of a say in the finances or what treatments they get. The ranchers want them to feel good to make them easier to control, but ...
Virtually all health care is local and monopoly and time sensitive, just like policing or kindergarten.
I live six blocks from supposedly the best neonatal intensive care unit in the region; Only people who live nearby can benefit and I should pay more for it. Much like I pay a lot of prop tax for the local police to keep crime rates to low range of the suburban experience. Much like education I'm sure the feds and state will kick in some bucks but most of the money will come from property tax (much as most of the benefits to me come from living nearby)
In other countries, it is considered distasteful that people in poor neighborhoods get less funding for their schools and police force. And especially for schools, the country at large reaps the benefit from people going to a good school, much moreso than it is a benefit to parents that their children go to a good school.
With the rise of identity politics in the USA, there's little motivation to help the kids of people who hate you and your kids, its a natural outcome of a multicultural nation.
Poor communities of all races have been underserved since long before whenever you imagine "identity politics" started to "rise" in the USA. Was "identity politics" not enshrined in the US Constitution, which protected racial slavery while giving more-slaveowning states extra voting power over less-slaveowning states
https://blackpast.org/aah/three-fifths-clause-united-states-...
Not even. In P&C insurance at least, the premiums are invested. Even if you operate at an actuarial loss (i.e. you pay out more than you receive in revenue), you can still make a profit on the investment income.
No! Mathematically the insurance business works the same as long as the average premiums cover the average costs for the pool. Identifying higher risk individuals and charging them more does nothing to lower the average cost as long as they continue to buy insurance. It only spreads the costs around differently.
That is, unless the idea is to make the cost so high for risky patients as to force them not to participate in the pool.
Which is I guess what they are saying. It does lower average premiums in the pool the only way mathematically possible, by forcing at-risk or sick patients out of coverage.
This raises average costs for the original pool (from before some patients were priced out) because those patients forced out will show up later at emergency rooms with expensive problems and no coverage. But that is no longer the insurance company's problem, so who cares.
Well at a society level there is no forcing people out other than death. So unless we can get enough sick people to die quickly and cheaply this system just forces higher costs on everyone.
Or maybe we could just cover everyone in one national pool without keeping a secret database of everyone's health history to use against them and gouge them more?