Neither of those scenarios are ideal.
If the only question was genetic differences, that’s a risk I think a lot of people would be willing to take (e.g., that I might be healthy until 100 and then die in your sleep, theretofore paying constantly for others who have had medical problems for 70 years straight). I myself would be willing to take that risk / pay for that style of universal coverage, if not for the aforementioned choice part (smoking, etc.) playing so heavily into the cost, in practice.
You are probably underestimating your own unknown non-lifestyle associated risk, along with the risks your offspring represent.
It also costs a lot to detect and judge risk factors, manage individual risk pools, assure compliance, etc. You save a lot of money by simply not bothering to risk-qualify eligibility and this offsets the costs associated with carrying lifestyle risks in a single large pool.
Assuming it's genuine, it's also misguided. Almost no-one wants to be obese, alcoholic, etc - accessible healthcare will reduce the incidence of all of these, which in turn will reduce the externalities associated with them.
You also don't need further state control to discourage smoking, drinking, junk food, etc - taxation is the mechanism used globally to discourage undesirable behaviour.
Almost all these things are biologically addictive, and furthermore the companies selling them have long known about their addictive qualities and then built marketing campaigns to ensure the public was not aware of the risks.
Taxation is how you recognize the externalities of this behavior while maintaining a free-market system.
Also, it’s easy to look at something like cigarettes which pretty much everybody would agree are a terrible idea, and say, “fine, tax em”, but what about when it’s sugar, then butter, then red meat, etc. Let people make their own choices instead, and just don’t put the onus on the rest of us to fix the problems of those choices. Banning smoking in public is acceptable because it’s no longer a choice that only affects yourself; it affects anyone near you in a really terrible way. But taxing cigarettes (or anything else) is no solution.
What happens is that when given the opportunity, business will pollute the market with proxy signals (like brand trust, or fear based selling) that people instinctively respond to.
These proxy signals will be subject to manipulation by well-capitalized actors and will not in general reflect outcomes or value. They will interfere with the fundamental signal, making it even harder to detect and interpret.
Therefore the market will not work, in the sense of delivering the best outcomes for costs.
(Note that I am strictly speaking of healthcare, where even experts are often unsure of causal relationships and the relative value of various therapies. In general I think markets are a wonderful thing. Here is an experiment to try... take a mild condition treatable by OTC medication, such as the symptoms of colds, allergies, etc, and see how long it takes you to identify, characterize and factor the available therapies, and then map this to available products. Evaluate interactions, cautions, effectiveness, risk, convenience, costs, etc. Now ask yourself, where did you get your information? Who did you have to trust? Why did you trust them? Is the basis for your trust and understanding available to the average person?
I've done the experiment. My conclusion is that healthcare large and small is not like other goods.)
I have firm belief in the fact that the market can more efficiently aggregate medical information but above all else create more rapid responsiveness to care. Bad products and actors are always seeded out over time in a society.
But they don't work like this all the time, for all goods.
Tetraethyl lead, which quite probably caused material long-term harm to entire generations, is gone because the bureaucrats banned it. The free market would never have phased it out organically in a reasonable time-frame, we know this because it didn't. The market participants fought for its continued use and obfuscated the issues to their advantage.
GlacierMD was explicitly an attempt to filter, aggregate and make available high-quality health-care information (i.e. improve the quality of the signal, which is necessary for efficient market functioning), and it did not find a value proposition in the market.
Except it doesn't -- what GlacierMD was trying to do is something that's currently done by humans at scale. Which he would have known if he understood the market better. This is a centralized function that is performed much higher up the chain and ends up in clinician / patient hands in the form of clinical guidelines.
This is maybe a useful tool for researchers to be used as one input in the development of clinical guidelines. But the functionality it delivers can be done manually (and will continue to be for liability reasons). In this case, the market worked. The author should be thankful he was able to get out of it only $40k in the hole.
Implementing something like what you describe, IMHO, would have the greatest positive impact on the health and welfare of Americans, of anything this century.
I have a friend who is very high up in one of the largest health insurance providers in the US, and I have often debated over the years with this person that same point, that the insurance layer is what creates the model for inefficiency, and abuse at the provider level ($5 Tylenol pill, $10 Band-Aid, minor treatments and return visits of dubious value, etc.), and that if we treated medical care as an ordinary consumer good, outside of the extreme emergencies that are bankruptigly expensive, things would be a lot better. The person I know at the insurance company doesn’t necessarily disagree either.